* Dollar slips, more Fed QE likely to trigger selling
* Open-ended approach from Fed the key to further weakness
* Euro/dollar option expiries set to influence price action
(Adds comment, updates prices)
By Neal Armstrong
LONDON, Nov 3 (Reuters) - The dollar edged lower on Wednesday as the Federal Reserve looked set to add more stimulus to spur a flagging recovery, a move analysts said would weigh on U.S. yields and ultimately put more pressure on the greenback.
Currency movements were subdued as investors were unwilling to make new bets ahead of the U.S. central bank's policy decision due at around 1815 GMT, with option expiries expected to dictate price action.
Markets were generally priced for the Fed initially to commit to buying at least $500 billion in Treasuries over five months in a fresh bout of quantitative easing, but traders were eager for details of the scope and pace of bond purchases.
"There is uncertainty over the details of the Fed announcement but ultimately QE leads to lower yields and should mean the dollar goes down in the long term," said Adrian Schmidt, currency strategist at Lloyds Banking Group.
The dollar slipped as much as 0.2 percent versus a currency basket to 76.597.
The euro inched up slightly on the day to $1.4050, held in a $1.4000/50 range for much of the European session. Option expiries at $1.4000 and $1.4050 later in the day were seen influencing intraday price action.
Sterling hit a nine-month high of $1.6147 after stronger-than-expected UK services sector activity data added to the argument that the Bank of England may not implement more QE anytime soon.
LIQUIDITY DRIES UP
Traders said liquidity had dried up since the start of the week, with one trader in London saying his turnover in the past two days had been the lowest in five years.
He added the market was expecting the Fed announcement to offer more clarity on whether the dollar's latest sell-off since September would continue through the end of 2010. "The market is hoping the FOMC is going to break us out one way or the other," the trader said, adding, "It could be this week gives us the last thing to focus on before year-end."
Against the yen, the dollar stood at 80.62 yen, unchanged on the day, as a Japanese holiday led to subdued trading, but the outlook was still skewed to the downside.
"Irrespective of recent ratcheting down of Fed QE2 expectations from $1 trillion to $500 billion, a likely open-ended approach (of say $100 billion per month) should in our view keep (the dollar) on a depreciation path," said Tom Levinson, currency strategist at ING in a note to clients.
"An absence of BOJ asset purchases of a similar scale together with USD/JPY's strong correlation with U.S. Treasury yields will keep the former biased lower."
Dollar/yen hovered close to this week's 15-year low of 80.21, with the all-time low at 79.75 close by, as the market stayed sensitive to potential for fresh Japanese intervention to stem the yen's rise.
The dollar remained weak, but showed some signs of steadying after a fall on Tuesday.
A widely expected outcome of U.S. midterm elections, where the Republicans took control of the House of Representatives while the Democrats were set to hang on to the Senate, also offered some support.
The Australian dollar was at $0.9985, retreating from a 28-year high above parity after weak building sector data took some of the shine off the currency, which rallied on Tuesday when the Australian central bank raised interest rates.
(Additional reporting by Naomi Tajitsu)