* Dollar drops to new low on yen before finding support
* Dollar slides broadly after lack of G7/IMF coordination
* Recycled FX reserves may find way to euro, Australia dollar
* Net US dollar short position at $30 bln on IMM
By Kevin Plumberg
HONG KONG, Oct 11 (Reuters) - The U.S. dollar slipped on Monday on expectations the Federal Reserve will have to print money to support the economy and discord in international currency policies, though risks of a short-term bounce grew.
The dollar fell to a 15-year low of 81.40 yen but later gained back ground. But the prospect remained that Japan could come into the market to cap the yen's rise, though some dollar bids in thin trading conditions put a floor under the pair for now.
With bets against the dollar piling up, the risk of sudden corrective moves higher was growing, even though there were few doubts about the medium-term direction of the dollar.
"Profit taking in G10 currencies versus the U.S. dollar looks to be the name of the game first up in Asia," Sue Trinh, senior currency strategist with Royal Bank of Canada in Hong Kong. "However, we're seeing a return to conventional price action post-payrolls whereby speculation the Fed will embark on another round of QE is causing weak U.S. data to be seen in a weak U.S. dollar dynamic."
The dollar sank to 81.40 yen after tripping stop loss sales on the break of Friday's lows of 81.71. Traders said bids quickly emerged, helping the dollar back to 81.95 yen, nearly unchanged on the day.
A holiday in Tokyo robbed the market of some liquidity and traders were wary in case the Bank of Japan stepped in. The risk of intervention seemed to have grown after Japan weathered the flurry of weekend G7 and IMF meetings with hardly any criticism of its recent bout of yen sales.
The euro was at $1.3985 after earlier climbing as high as $1.4011, seeking to test last week's $1.4030 high. A rise above technical resistance at $1.4045 would bring on the next obstacle at $1.4216, which acted as support on Dec. 22, when the euro was declining. All the talk of quantitative easing sent commodity prices surging on Friday and in turn lifted the Australian dollar to $0.9895, not far from its recent 28-year peak of $0.9918.
The Aussie was at $0.9873, up 0.2 percent from late Friday in New York.
The euro and the Australian dollar could prove to be the paths of least resistance to express a longer-term weak U.S. dollar view, especially if central banks seeking to diversify their growing foreign exchange reserves choose these strengthening currencies.
DATA DRIVES DOLLAR WEAKNESS
The September U.S. employment report showed a fourth consecutive month of a shrinking labour market for a cumulative 393,000 jobs lost since June. The data caused the U.S. Treasury yield advantage over other major currencies to narrow further and added another factor against the dollar.
The IMF's failure to get any agreement on global imbalances at multilateral meetings over the weekend seemed to ensure that currency tensions would only fester further.
Analysts at JPMorgan noted G20 officials were set to meet three times in the next month, when the dissonance around currency policy is the highest in a decade.
"By mid-November, two operating principles should be clear: that the G20 will not agree formally to guide FX markets, but that countries will be allowed to manage a dollar decline imposed by a renewed Fed easing cycle," they wrote in a note to clients.
"This outcome isn't optimal, but it is far from a war."
Still, a near-term obstacle to dollar strength is simply that speculators have already sold the dollar heavily and have amassed a large short position.
Short-term investors on the International Monetary Market had a net short U.S. dollar position of $30.5 billion in the week ended Oct. 5, up from $22 billion in the prior week, CFTC data showed. That was the largest short dollar position since November 2007, Credit Agricole CIB said in a note.
The minutes of the Fed's September 21 meeting are due on Tuesday and the market will be keen to see how much agreement there was within the board on further easing. (Additional reporting by Reuters FX analyst Krishna Kumar and Wayne Cole in SYDNEY; Editing by Ron Popeski)