* Dollar index slides on speculation Fed may suggest more QE
* Aussie rallies after hawkish comments from RBA's Stevens
* Dlr/yen little changed, investors wary of intervention
(Adds comment, updates throughout)
By Naomi Tajitsu
LONDON, Sept 20 (Reuters) - The dollar slipped broadly on Monday on speculation the Federal Reserve may flag the need to inject more stimulus into the struggling U.S. economy when it announces its latest policy decision on Tuesday.
The U.S. currency traded in a thin range against the yen due to a market holiday in Japan and as investors were cautious of taking big yen positions after Japan's intervention last week.
The prospect the U.S. economy may require more quantitative easing -- often seen as currency-negative -- highlighted differences in policy outlooks among major central banks, with the Australian dollar hitting a two-year high on hawkish comments from the Reserve Bank of Australia. [ID:nSGE68J073]
The Fed is widely expected to refrain from implementing new steps to ease monetary policy on Tuesday, while renewing its promise to keep its portfolio of assets from shrinking.
"The consensus is that the Fed won't do anything tomorrow, but if they indicate that more QE may be on the way, it would send a strong signal to sell the dollar during the week," said Kasper Kirkegaard, currency strategist at Danske in Copenhagen.
By 0948 GMT, the U.S. currency had fallen 0.4 percent against a currency basket, taking the dollar index down to 81.046 .DXY, near a five-week low hit last week.
The Australian dollar AUD=D4 rose more than 1 percent to $0.9470, its strongest since mid-2008, after RBA Governor Glenn Stevens suggested Australian rates would continue to rise. This would boost the Aussie's rate advantage.
A sluggish U.S. recovery has stung the dollar in past months as it has raised the possibility of more quantitative easing, but analysts say recent data, while far from stellar, hardly suggests a "double-dip" recession.
As a result, many expect the Fed will lay off any policy loosening for now, and some say the biggest risk heading into the Fed meeting is for an upward dollar correction.
"Any disappointment for expectations of further QE will be dollar positive," said Raghav Subbarao, currency analyst at Barclays Capital, adding the Australian and Canadian dollars were most at risk from a rise in the U.S. currency.
CROWN UNCHANGED AFTER SWEDISH VOTE
The euro EUR= rose 0.4 percent to $1.3090.
A rise in European shares .FTEU3 helped the single currency recover from a slide late last week, when speculation Ireland may turn to the IMF for assistance knocked the euro.
While such speculation was blasted by the Irish government it highlighted the fragility of some countries in the euro zone, and analysts say such issues may come back to haunt the euro.
The dollar JPY= traded at 85.70 yen, barely moved after Japan massively sold yen for dollars last week to curb yen strength, pulling the U.S. currency up from a 15-year low.
Further dollar gains were capped by its 55-day moving average, which came in at 85.88 yen on Monday, and investors were focused on whether the dollar would break above 86.00 yen.
In addition to the prospect of more yen intervention, strength in the Japanese currency may subside as speculators have slightly cut long yen positions -- bets it will appreciate.
The latest CFTC data shows net long yen positions fell to 47,642 as of last Tuesday, the day before Japan entered the market, from 52,183 the previous week. Still, speculators continue to increase bets on more dollar weakness. [IMM/FX] <^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^
Graphic on positioning data r.reuters.com/kus26k ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>
The euro EURSEK=D4 slipped to 9.2010 Swedish crowns as the crown recovered from earlier losses after a Swedish election on Sunday resulted in a hung parliament. [ID:nLDE68J007]
Analysts said the uncertainty after Prime Minister Fredrik Reinfeldt secured a second term but failed to win an outright majority was unlikely to have a major impact on the crown, which has outperformed due to Sweden's strong economy and monetary policy outlook.
(Graphic by Scott Barber)