* Investors trim short dollar positions but weakness intact
* Euro slips vs dollar, earlier climb loses momentum
* Dlr/yen nears pre-intervention levels, BOJ awaited
* Dlr falls to 2-1/2 yr low vs Swiss franc
(Recasts, updates prices, adds details)
NEW YORK, Oct 4 (Reuters) - The dollar rallied on Monday, recovering from early declines as renewed concerns about the stability of the euro zone overshadowed concerns the Federal Reserve may further ease U.S. monetary policy.
Ireland's economy will crawl to a virtual halt this year, defying government hopes of modest growth, the Irish central bank said on Monday, underlining the challenge the country's leaders face to revive its fortunes. [ID:nLDE69313N].
Headlines from other peripheral euro zone countries Portugual and Greece also hindered the euro with investors and speculators said to be trimming long positions after the single currency hit a 6-1/2-month high above $1.38 on electronic trading platform EBS.
Against the yen, the dollar hovered near a 15-year low, fuelling speculation that Japan may re-enter the market to weaken its currency.
"The euro has come a very long way in a very short period of time and certainly Ireland and the peripheral euro zone country issues have not gone away," said Omer Esiner, chief market analyst at Commonwealth Foreign Exchange Inc in Washington. When those issues "come back in the spotlight, they are used to take some profits on the euro."
The euro
Portugal's Finance Minister Fernando Teixeira dos Santos said on Monday the country has to consolidate its finances swiftly and in a sustainable manner and all political parties have to act together to approve new austerity measures and avert a debt crisis. [ID:nLIS002473]
That news came as Greece, in its draft budget on Monday, showed it expects the economy to contract by 2.6 percent next year after a 4.0 percent slump in 2010, staying in recession for a third straight year [ID:nATH005716].
BOJ MEETS
The euro declines helped push the dollar up against a currency basket. The dollar index <.DXY> rose 0.4 percent to 78.361, up from 78.029 on Friday, its weakest since January.
This week sees the release of crucial U.S. jobs data while the central banks of Australia, the euro zone, Japan and the United Kingdom hold policy meetings. The International Monetary Fund and Group of Seven finance ministers also meet this week.
Given these risks, analysts said investors were likely to trim their short dollar positions even though many in the market expect the prospect of more U.S. quantitative easing will continue to hurt the currency.
The euro briefly extended losses against the dollar after data showed pending sales of previously owned U.S. homes rose to a four-month high, indicating the housing market was regaining some stability. [ID:nN04108403]. The data prompted hope of less need for additional quantitative easing though its effect was fleeting.
Despite Monday's gains, the dollar's downward trend would
remain intact. The dollar fell to its lowest in 2-1/2 years
against the Swiss franc
The dollar
The Bank of Japan began on Monday a two-day policy meeting and was expected to extend a cheap fund-supply tool to help shore up the struggling economy. [ID:nTOE69003G]
Some market participants cited speculation any BOJ stimulus steps may be followed by more yen-selling intervention. Some analysts expect Japanese authorities to step in to sell yen if the dollar falls under 83 yen, as they did last month. (Reporting by Nick Olivari, Additional reporting by Naomi Tajitsu in London, Editing by Chizu Nomiyama)