FOREX-Euro struggles to hold gains after Fed comments

* Euro hits day's low, Fed comments clash with ECB view

* Support at $1.40, but seen in range below $1.4250

* Euro/yen at post-intervention high; Dlr/yen inches up

(Updates prices, adds quotes)

By Jessica Mortimer

LONDON, March 29 (Reuters) - The euro struggled to hold gains against the dollar on Tuesday, as expectations for a euro zone interest rate rise were offset by a Federal Reserve warning about keeping U.S. monetary policy loose for too long.

The euro rose to around $1.4150 before retreating as traders took profits on its gains after Fed President James Bullard said the U.S. central bank may normalise monetary policy before global uncertainties are resolved. [ID:nLDE72S0RJ]

Further comments about a possible cut to the Fed's second round of quantitative easing pushed the euro to a session low, although bids around $1.4050, including those from sovereign names, were seen limiting further near-term losses. The euro has retreated from a 4 1/2-month high of $1.4249 hit last week, but has been supported on the view the European Central Bank may raise interest rates as early as next month.

Comments from ECB President Jean-Claude Trichet on Monday bolstered this view as he said inflation was "durably" above the central bank's target. [ID:nLDE72R20A]

"Euro/dollar is trading at the moment on two factors -- interest rate differentials and the technical configuration," said Niels Christensen, currency strategist at Nordea in Copenhagen.

"The euro failed to break below $1.40 yesterday, and last week it disappointed on the upside, failing to test the November highs (at $1.4283), so it is likely to stay in a $1.40-$1.42 range".

The euro was a touch lower on the day at $1.4060. It pushed through bids seen around $1.4080, but hovered above a low of $1.4021 hit on Monday.

The $1.40 level is supported by a trendline drawn from the low below $1.30 hit in January, while the euro's 21-day moving average stands just above that level, at around $1.4006.

On the upside, heavy options-related barriers around $1.4250 were expected to cap gains. A break of that level may see a test of the November high of $1.4283.

Many in the market argued the euro would likely stick to the $1.40-$1.4250 range ahead of U.S. payrolls data due on Friday, while low implied volatility levels suggested a break-out on either side was unlikely in the near term.

One-month euro/dollar implied vol traded around 9.9 percent on Tuesday, near its lowest level in roughly a year.

"One-month (vol), which still covers the post-Easter lull, remains reasonably offered," Citi analysts said in a note. "We feel that it is hard to see it pop with everyone keen to jump on the selling bandwagon whenever it does start moving higher."

RATE OUTLOOK SUPPORT

Investors continued to focus on the prospect of higher rates and shrugged off the euro zone debt crisis, despite rising concerns about Portugal's ability to finance itself as the country prepares for a snap election. [ID:nLDE72R1RI]

The euro also rose 0.5 percent against the yen to around 115.64 yen, its highest level since Group of Seven central banks intervened jointly at Japan's request to curb the yen's appreciation following a devastating earthquake. It was on course to test 116.03, above which would mark a 10-month high.

The dollar rose 0.5 percent to 82.10 yen , with traders citing demand from UK and European banks. Gains were capped by offers, including those from Japanese exporters, around 82.00 yen. Further up, orders were seen around 82.50 and 83.00.

The rise in the U.S. currency versus the yen has quelled speculation of further Japanese intervention. Many in the market anticipate a fall to around 80 yen or lower will be required for Tokyo to re-enter the market to sell the Japanese currency.

The dollar index <.DXY>, which tracks the U.S. currency's performance against a basket of major currencies, edged up 0.2 percent to 76.298. (Additional reporting by Naomi Tajitsu; Editing by Catherine Evans)