FOREX-Dollar falls on caution before Fed meeting next week
* Dollar falls broadly, dollar index close to 1-month low
* Traders cautious before Fed policy meeting next week
* Euro close to 5-week peak versus dollar
LONDON, July 26 (Reuters) - The dollar fell to a five-week low against a basket of major currencies on caution about the possibility of the Federal Reserve delivering a downbeat message after its policy meeting next week.
Traders said a Wall Street Journal report that the U.S. central bank may debate changing its forward guidance to emphasise that it will keep rates low for a long time prompted investors to trim bets on the dollar gaining.
The dollar index fell 0.5 percent to 81.579, its lowest since June 20. Chart support stood at 81.50 - its 200-day moving average and the 76.4 percent retracement of its June to early July rally.
The latest falls caused the dollar to resume a slide that began on July 10, when minutes of the Fed's June meeting gave investors second thoughts about when the bank would start reducing stimulus. The Fed's two-day meeting ends on Wednesday.
"We could see more squaring of long dollar positions keeping the downward pressure on the dollar ahead of the FOMC meeting next week," said Niels Christensen, currency strategist at Nordea in Copenhagen.
He said investors were still long of dollars, particularly against the yen and emerging market currencies.
The euro rose to a five-week peak of $1.32975, helped by this week's solid euro zone purchasing managers' surveys and German business climate index.
However, the possibility that the Fed will start to scale back asset purchases under its quantitative easing programme soon, perhaps as early as September, could limit dollar losses.
Firmer U.S. data could quickly encourage market players to buy the dollar again, Christensen said.
The dollar fell 0.8 percent to a two-week low of 98.485 yen , close to chart support at the July 11 low of 98.20 yen.
"It seems like the Fed is raising the bar on a future rate hike. For the moment, the dollar is likely to trade in its recent range until there is a clear signal from the Fed," said Katsunori Kitakura, associate general manager of the market making unit at Sumitomo Mitsui Trust Bank in Tokyo.