FOREX-Euro firm after mild bounce from 12-yr lows, Fed in focus

* Euro holds steady after bouncing from 12-year lows overnight

* Dollar’s dip on soft U.S. data gives euro breather

* BOJ expected to stand pat on policy, maintain massive stimulus

* RBA leaves rate cut on table, Aussie dips

By Shinichi Saoshiro

TOKYO, March 17 (Reuters) – The euro stood firm on Tuesday after soft U.S. data and edginess ahead of this week’s Federal Reserve policy meeting dented the dollar’s rally and helped the common currency pull out from 12-year lows.

The euro was steady at $ 1.0570, having rebounded overnight from $ 1.0457, its lowest since 2003.

The euro has been under pressure since the European Central Bank activated its 1 trillion euro bond-buying quantitative easing scheme last week and drove euro zone bond yields to record lows.

It got some relief after Monday’s weaker-than-expected U.S. manufacturing, industrial output and housing data pushed down U.S. debt yields and cooled the dollar’s advance.

Traders see the market getting little nervous ahead of the Fed’s policy-setting meeting on Tuesday and Wednesday.

Expectations have been rising that the Fed will drop the word “patient” from its statement on the timing of interest rate increases – a key factor behind the dollar’s recent surge.

But some traders have also cautioned that the dollar’s strength and its potential negative impact on the economy might be mentioned by the Fed.

“The focal point for the Federal Open Market Committee meeting still remains whether the ‘patient’ will be dropped or not, and another word might be used as a replacement,” said Junichi Ishikawa, market analyst at IG Securities in Tokyo.

“But the dollar’s recent strength, which is very much a political factor as well, may also get a mention and hurt dollar longs. It is a factor that participants will be keeping on the back of their minds,” he said.

The dollar inched up 0.1 percent to 121.41 yen, stuck in a relatively narrow range since advancing to an eight-year high of 122.04 on March 10.

The Bank of Japan concludes its two-day policy meeting later on Tuesday, at which the central bank is expected to maintain its massive stimulus and signal its conviction that a steady economic recovery will help it achieve its price target without additional monetary easing.

The dollar index was little changed at 99.696 after pulling back from a 12-year high above 100.00 struck late last week.

The Australian dollar dipped slightly after minutes of the Reserve Bank of Australia’s latest policy meeting showed policymakers left the door open for further interest rate cuts.

The RBA cut interest rates to a record low of 2.25 percent in February and stood pat on policy this month.

The Aussie was down 0.2 percent at $ 0.7625 (Editing by Shri Navaratnam)

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