* Markets happy to hold euros before ECB meeting next week
* Dollar at two-week highs vs yen before Japanese election
* Graphic: World FX rates in 2017 http://tmsnrt.rs/2egbfVh
LONDON, Oct 19 (Reuters) - The euro climbed to a three-day high on Thursday on hedging-related demand from bond investors before a European Central Bank policy meeting next week, though political uncertainty around Catalonia crimped gains.
"Frankly there is no fundamental driver for the euro move higher especially in the light of the overnight news from Spain and markets will be in a holding pattern around broad levels until we see more clarity," said Lutz Karpowitz, an FX strategist at Commerzbank in Frankfurt.
The single currency rose 0.3 percent in early trades to $1.1822 to its highest level in three sessions.
But more gains will be hard-fought given the euro is coming up against some technical levels around the $1.1880 line, the 50 percent trading range between September to October.
Catalonia's leader pledged to press ahead with his independence bid if Spain moves to suspend the region's autonomy, a regional government source said on Wednesday, hours before a deadline over keeping the euro zone's fourth-largest economy united.
While the euro has remained broadly impervious to political developments in recent weeks, investors say any unexpected developments could drag the single currency lower.
"The Catalonia thing is priced in now unless it blows up really badly and people seem to be happy going long euros before the ECB meeting next week," aid John Marley, head of FX strategy at Infinity international, a currency risk management firm.
The European Central Bank will say on Oct. 26 it will start trimming its monthly asset purchases to 40 billion euros from 60 billion euros in January, according to a Reuters poll of economists.
Elsewhere, the dollar hit its highest in about two weeks against the yen supported by this week's rise in U.S. bond yields, with the market's attention turning to who will next lead the Federal Reserve and this weekend's Japanese election.
The dollar index, which tracks the greenback against a basket of six major rivals, was flat on the day at 93.32.
It rose as high as 113.095 yen in early Asian trade, its strongest level since Oct. 6. The dollar last changed hands at 112.99 yen, steady from late U.S. trade on Wednesday.
This week's rise in U.S. bond yields helped lend support to the greenback. The two-year U.S. Treasury yield rose to its highest since November 2008 on Wednesday even though real yields on ten-year maturities have declined.
For Reuters Live Markets blog on European and UK stock markets see reuters://realtime/verb=Open/url=http://emea1.apps.cp.extranet.thomsonreuters.bi z / c m s / ? p a g e I d = l i v e m a r k e t s (Reporting by Saikat Chatterjee; Editing by Toby Chopra)