* Dollar boosted briefly on Geithner comment on majors
* But short-covering fades as dollar sellers appear
* Market watching G20 finmins meeting for FX discussion
By Charlotte Cooper
TOKYO, Oct 21 (Reuters) - The dollar rose on Thursday on short-covering after comments by Treasury Secretary Tim Geithner that major currencies were roughly in alignment, but tempered its gains ahead of a G20 meeting likely to debate currency policies.
The greenback has been under heavy selling pressure for weeks, pushed down by expectations of further quantitative easing by the Federal Reserve to boost a sluggish U.S. recovery, and the market has generally become short dollars in anticipation.
It held mild gains against the euro and a basket of currencies but struggled against the yen, holding close to a 15-year low of 80.84 yen set on Wednesday.
Speculation of a grand bargain by the Group of 20 to rebalance the global economy is swirling, with G20 finance and central bank chiefs meeting on Friday in South Korea to discuss a a common path on managing currency, trade and economic imbalances ahead of a leadership meeting in Seoul next month.
Analysts said the market would watch closely for signs on how discussions were going.
"If we hear divergent comments, that will be more worrying," said Robert Ryan, FX strategist at BNP Paribas in Singapore.
Washington is pressing Beijing to let the yuan appreciate faster, and talk of competitive currency depreciation has flared as developed countries keep monetary policy easy to shore up sluggish growth but capital flows in search of better yields push up currencies in faster growing emerging economies.
The Wall Street Journal quoted Geithner as saying he would use the weekend meeting to advance efforts to rebalance the world economy and move toward norms on exchange rate policy.
He divided currencies into three categories, with the first, including China's yuan, undervalued by any measure, while the second were of emerging economies with flexible exchange rates that intervene or impose taxes.
The third was the major currencies, "which are roughly in alignment now", a comment the WSJ said suggested he saw no reason for the dollar to fall further against the euro and yen.
The euro, which fell as far as $1.3872, later recovered to $1.3900 as the market examined the comments more closely, but was still down 0.4 percent on the day.
The dollar index rose 0.4 percent to 77.459, holding off a 10-month low of 76.144 marked last week.
Taisuke Tanaka, FX strategist at Nomura Securities, said these and other recent remarks by Geithner stressing the U.S. was not pursuing a deliberate policy of devaluing the dollar were likely intended to help Washington's negotiating position at the G20.
"If they urge China to revalue the yuan, they might be told that the dollar's weakness is the problem," Tanaka said.
"Since it is clear that the direction is toward an expansion of quantitative easing (in the United States), it is hard to expect a sustained rebound in the dollar," he said.
The dollar rose as far as 81.84 yen but quickly retreated to 81.20 yen, up just 0.1 percent on the day. Early on in the session it had dipped to 80.98 yen, not far off its latest 15-year low and nearing a record low at 79.75 yen set in 1995.
Its brief run higher met with selling from Japanese exporters and Asian and European banks, traders said, with some noting its tight trading range in recent weeks had put off short-term speculators, who preferred more active pairs such as euro/dollar or Aussie/yen.
Traders reported talk of stop loss sell orders at 80.80 yen and 80.50 yen but also of an institutional Japanese investor's bids below 81 yen.
The market is wary that Japanese authorities could intervene to slow the yen's rise again, after they did so on Sept. 15, selling yen for the first time in more than six years. (Additional reporting by Masayuki Kitano and Yoko Matsudaira; Editing by Joseph Radford)