* Euro down 0.4 percent at $1.3170
* Markets expect some Fed easing steps but not full QE
* Falls in Asian shares hurt sentiment
* BOJ stands pat on monetary policy as expected
(Recasts, adds quotes, changes dateline from TOKYO)
By Tamawa Desai
LONDON, Aug 10 (Reuters) - The dollar rose against major currencies on Tuesday as traders trimmed short positions, awaiting the U.S. Federal Reserve's policy meeting amid speculation of further easing to shore up a flagging U.S. economy.
Many market players expect the Fed to take some minor steps such as reinvesting funds to maintain its balance sheet, but not going back to full-fledged quantitative easing.
Investors also pared back on perceived riskier currencies after seeing a fall in Asian stocks.
"We're seeing some squaring up of short positions ahead of the Fed, and there is some risk-off sentiment as well as Asian stocks closed lower, prompting a selloff in high yielders such as the Australian dollar," said Christian Lawrence, currency strategist at RBC Capital Markets.
By 0720 GMT, the euro fell 0.4 percent from late U.S. trade on Monday to $1.3180, pulling away from a three-month peak of $1.3334 hit on Friday on trading platform EBS.
The euro's decline accelerated after falling below trendline support on hourly charts near $1.3200, with stop-loss orders also adding to the euro's drop.
The pair was back to around levels seen before Friday's U.S. jobs report, which showed non-farm payrolls fell 131,000 in July, while private employment rose a modest 71,000, below forecasts for a gain of 90,000.
Shares in Hong Kong's Hang Seng index fell 1.2 percent and the Shanghai Composite Index dropped 2.9 percent.
Steps by the Fed range from a pledge to consider more quantitative easing, reinvesting money from maturing debt into Treasuries or mortgage-based securities, cutting interest paid on excess reserves, and buying financial assets outright. The Fed's decision is due out around 1815 GMT.
"If the Fed does take action today and U.S. interest rates fall, that is likely to lead to dollar selling," said Hiroshi Maeba, manager of forex at Nomura Securities.
REPATRIATION
The yen was the exception to the dollar's broad rebound on Tuesday as it edged up slightly against the greenback. Traders cited talk of fund repatriation by Japanese investors related to coupon payments of U.S. Treasuries due in mid-August.
The Bank of Japan kept interest rates steady at 0.1 percent and held off on new policy steps, as expected.
BOJ Governor Masaaki Shirakawa said the central bank's board spent much time debating the recent rise in the yen and how it could affect business sentiment, but he said no major central bank targets currency levels.
The dollar was flat at 85.85 yen, some distance from last Friday's eight-month low of 85.02 yen.
Market players said there were substantial stop-loss orders just under options barriers at 85 yen, with more stops sitting below 84.82 yen. A fall below 84.82 yen would take the dollar to a 15-year low against the yen.
Traders think the yen will eventually test these levels as Japan is seen unlikely to intervene to curb the yen unless dollar/yen falls to around 80 yen.
Japanese Finance Minister Yoshihiko Noda declined to comment on intervention. He repeated recent market moves are somewhat one-sided.
The Australian and New Zealand dollars were also hurt as sluggish Chinese import figures fanned concerns of slowing domestic demand. (Additional reporting by Hideyuki Sano in Tokyo; Editing by Susan Fenton)