* Dollar speculative shorts largest since mid-2008
* Lack of G7/IMF coordination hampers greenback
* China temporarily increases deposit reserve ratio
* Dollar hits 15-yr low vs yen but steadies at 82.00
(updates prices, adds quote)
By Neal Armstrong
LONDON, Oct 11 (Reuters) - The dollar slipped on Monday as the Federal Reserve looked set to pursue loose monetary policy to support the U.S. economy, although with bets against the greenback piling up traders were wary about pushing it lower.
The IMF's failure to reach an accord on how to tackle the issue at meetings over the weekend seemed to ensure currency tensions would only mount up and left dealers wondering when more governments would take action to shift the burden of the falling dollar. [ID:nN10287368]
"There looks to be no basis for agreement on currency imbalances from the weekend meetings and the U.S. looks set to continue to pursue loose monetary policy going forward," said Neil Mellor, currency strategist at Bank of New York Mellon.
The U.S. September employment report on Friday exacerbated concerns over the economy, showing the labour market shrank for the fourth consecutive month. Traders said the next focus would be on Fed minutes on Tuesday for fresh insight into the central bank's thinking on monetary easing measures.
Debate centres on whether the Fed will opt for drip-feed QE or a "shock and awe announcement", with most investors thinking the trigger will be pulled at its next policy meeting in November. Some are expecting the Fed to announce at least $500 billion of Treasury purchases over the next six months.
"Short dollar positions are stretched but it will take a turnaround in U.S. data or if the Fed rules out QE to see a dollar rebound," said Adrian Schmidt, FX strategist at Lloyds TSB Financial Markets.
The dollar's losses were slightly offset by China's decision, according to Reuters sources, to raise temporarily its deposit reserve ratio for six big banks on Monday, which dented risk appetite but had no major market impact. [ID:nBJB003961].
DOLLAR POSITIONING STRETCHED?
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 as Asian reserve managers diversify their foreign exchange reserves, though positioning may be stretched.
Currency speculators boosted bets against the dollar to $30
billion in the latest week, the largest bet against the U.S.
currency since mid-2008. [ID:nN08169848]
Graphic on FX positioning http://r.reuters.com/kus26k
Graphic on trade-weighted FX moves since 2007
http://r.reuters.com/qun86p
"Where EUR/USD is concerned, the fact that we feel the initial, justifiable leg of dollar weakness has already run its course makes us apprehensive about speculative euro buying above $1.40," said Stephen Gallo, head of market analysis at Schneider Foreign Exchange.
At 1120 GMT the euro was at $1.3932
Traders saw resistance at $1.4216, a level which acted as support on Dec. 22, when the euro was declining, together with the next key Fibonacci level at $1.4372, the 76.4 percent retracement of the euro's fall from November to June.
The dollar sank to a 15-year low of 81.37 yen
Dollar/yen traded at 81.97, up 0.09 percent, while the dollar was down 0.1 percent against a currency basket <.DXY> at 77.228, close to a nine-month low of 76.906 hit on Thursday.
The risk of another round of intervention to weaken the yen 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, but there was no sign of action on Monday.
(Graphics by Scott Barber, additional reporting by Anirban Nag)