* Fed may buy few hundred bln dollars of Treasures-WSJ
* WSJ article adds to doubts on "big bang" QE2, lifts dollar
* Australian dollar drops on subdued CPI
By David Fox
HONG KONG, Oct 27 (Reuters) - The U.S. dollar edged up on Wednesday on doubts the Federal Reserve will aggressively buy assets to pump more money into the system, while commodity stocks led Asian stocks lower.
Most currency dealers expect the Fed to opt for more quantitative easing at a policy meeting next week-- essentially printing money to buy assets and pull market rates lower -- but some believe the weakening dollar already reflects those expectations, and the question of how much easing, and how fast, has kept investors edgy.
The Wall Street Journal said on Wednesday the Federal Reserve would probably unveil a programme of U.S. Treasury bond purchases worth "a few hundred billion dollars", but gave no source for the report. [ID:nTKW007152]
(For a preview of the Fed meeting with possible outcomes,
see [ID:nN25168493])
The euro was down 0.23 percent on the day at $1.3826
For more on the G20 meeting, click [ID:nTOE69K01G]
Will Japan intervene again? click [ID:nTOE69P01U]
G20's truce on currencies
http://r.reuters.com/nan99p
The Fed meets on Nov. 2-3, but some investors have begun to reconsider the likelihood of a big burst of QE after comments from various members of the central bank.
The U.S. currency rose broadly on Tuesday as investors speculated the Federal Reserve would proceed more cautiously in announcing any asset-buying, scaling back bets against the greenback.
"I think it's still possible that QE II is not a done deal for November, even though the market has been trading as if it is," said Brian Dolan, chief currency strategist at Forex.com.
AUSSIE CPI SURPRISE
New data from Australia showed consumer prices there rose by less than expected in the last quarter while the annual pace of core inflation was the slowest in five years -- greatly lessening the urgency for a hike in interest rates next week.
The key trimmed mean measure of underlying inflation favoured by analysts rose 0.6 percent in the quarter and 2.5 percent for the year, seemingly justifying the RBA's decision to skip a rise in its 4.5 percent cash rate this month and give it room to pause ahead of the U.S. Federal Reserve meeting.
The market now implies around a 29 percent chance of a hike
next week
ASIAN STOCKS FLAT TO LOWER
The MSCI index of Asia Pacific stocks outside Japan slipped 0.46 percent <.MIAPJ0000PUS> while the MSCI's emerging market stock benchmark <.MSCIEF> was down 0.23 percent at 0130.
The rebounding dollar has caused some investors to bail from commodity stocks, pulling down the MSCI Asia ex-Japan commodity sector index 1.2 percent on the day.
U.S. stocks ended little changed before the potential market tumult of next week's U.S. elections and likely announcement of more stimulus from the Fed.
Next week's high-profile events could signal shifts in both monetary policy and legislative direction, raising fears that trumped Tuesday's earnings news and economic reports.
Overnight, the Dow Jones industrial average <.DJI> gained 0.05 percent, while the Standard & Poor's 500 Index <.SPX> gained 0.02 point to 1,185.64. The Nasdaq Composite Index <.IXIC> gained or 0.26 percent.
The pan-European FTSEurofirst 300 <.FTEU3> index of top shares closed down 0.2 percent, after rising 0.3 percent on Monday to end near a six-month high.
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