FOREX-Yen steadier as BOJ meeting looms
* Yen steadier after a short-covering rally Friday
* Upside seen capped as BOJ meeting nears
* BOJ expected to ease on Tuesday, but could disappoint
SYDNEY, Oct 29 (Reuters) - The yen got off to a steady start on Monday, having rallied late last week as markets cut bearish positions amid talk the Bank of Japan might not ease as much as expected at its looming policy meeting.
Under intense political pressure, the BOJ is likely to expand its asset-purchase programme by at least 10 trillion yen ($125.69 billion) on Tuesday in a bid to spur an economy teetering on the verge of recession.
The dollar bought 79.63 yen, little changed from late New York levels, having retreated from a high of 80.38. But it was still up about 2 percent from its mid-October low as speculation for more BOJ easing grew.
Analysts said the BOJ has a track record of disappointing markets and Friday's price action suggested a bit of caution setting in.
``The consensus on the BOJ at Tuesday's meeting is for 10 trillion yen in asset purchases. Our economists have similar expectations, but believe that BOJ will not start buying longer JGB maturities and will not increase their current 1 percent inflation goal,'' Kiran Kowshik, a strategist at BNP Paribas wrote in a client note.
``This could pose a disappointment to short-JPY positioning which now are at extreme levels.''
Indeed, data on Friday showed currency speculators had raised their bets against the yen, with the market posting a net short position for the first time since May.
The euro eased to 103.00 yen, having pulled back from a near six-month peak of 104.59 reached on Oct. 23. It was still up some 3 percent from its October low of 99.78.
Against the dollar, the single currency fetched $1.2930 , well within its $1.2800/3200 range seen in the past several weeks.
To break out of the range, traders said Spain needs to request for a bailout and trigger the European Central Bank bond-buying programme.
Greece is also shaping up to be a fresh headache for euro bulls after the country's opposition leader said his party would vote against an austerity package expected to go before parliament this week.
Alexis Tsipras, head of the far-left Syriza party, said cuts to wages and welfare payments in a package the government agreed with the EU and IMF would pile misery on Greeks.
Meanwhile, the Australian dollar traded at $1.0360, poised for another go at the Oct. 18 peak of $1.0412. A break there would bring the September high of $1.0624 in view.
Aussie-dollar bears have been hit hard this month after multiple attempts to drive the currency lower failed, with good support emerging below $1.0200.
Apart from the BOJ, this week's event risk is the influential U.S. payrolls report due on Friday. A strong number could prompt speculation the Federal Reserve might have to do less through QE3, though signs are it is considering expanding the programme in December.