* Dollar seen remaining pressured if Fed disappoints
* Euro gains on the day vs dollar with $1.50 eyed
* Aussie drops after hitting post-float peak (Updates prices, adds details)
NEW YORK, April 25 (Reuters) - The euro rose against the dollar on Monday in a volatile but illiquid session with investors reluctant to make large bets in case the U.S. Federal Reserve shows no sign this week of changing its easy monetary policy.
With many markets closed for the Easter holiday and no major U.S. economic reports on the calendar, the Fed's meeting on Tuesday and Wednesday will be the key event risk this week as traders try to gauge the direction of U.S. policy.
Market participants will look to the post-meeting news conference by Fed Chairman Ben Bernanke on Wednesday -- the first regularly scheduled news briefing by a Fed chief in the U.S. central bank's 97-year history -- to see how the Fed plans to exit from its ultra-loose policy.
If the Fed surprises the market and turns more hawkish it will pose a risk to the sizable amount of dollar shorts in the market.
Currency speculators pared bets against the U.S. dollar for a fourth straight week, according to data from the Commodity Futures Trading Commission released Friday, but were still net short to the total of $24.36 billion. For details, see [ID:nN25194222]
"The united currency is unlikely to move very far in either direction until the chairman of the Federal Reserve has completed his first-ever press briefing" after the rate announcement by the policy-setting Federal Open Market Committee, said Joseph Trevisani, chief market analyst, FX Solutions, LLC in Saddle River, New Jersey. "The questions surrounding the twin topics of quantitative easing and rate policy should be enough to keep traders on the sidelines until then."
The dollar index, which measures the currency's value against six major currencies, was little changed at 74.024 <.DXY>. However, many traders say it could test a three-year low of 73.735 hit last week. A break of that level could open the way for a test of the record low of 70.698 touched mid-July 2008, according to Reuters data.
If Bernanke indicates that the Fed's accommodative policy may continue for the foreseeable future, the dollar will likely see selling pushing the euro/dollar toward the $1.5000 psychological barrier, strategists said. ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^ For graphic on Fed funds rate hike expectations:
http://r.reuters.com/xyz48r ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^
"The bond and currency market reaction is still an unknown and a significant risk," said Camilla Sutton, chief currency strategist at Scotia Capital in Toronto.
The Fed is expected to confirm its $600 billion asset purchase program, known as QE2, will end as scheduled in June.
The program is a bane for the dollar since it is tantamount to printing money, so an indication that it may end earlier would be positive for the beaten-down currency. The euro is up nearly 9 percent against the dollar this year.
Once QE2 ends there will be some upward pressure on yields. With U.S. monetary policy still notably weak, an extended dollar rally is not likely, Sutton said.
"This is the medium-term risk; the near-term risk lies in the wording of the statement, any shift in tone, the press conference itself and the FOMC's updated set of forecasts," she said.
The euro
The Australian dollar touched its highest level since the
currency was floated in December 1983, before falling to tradeat $1.0721
Against the yen, the dollar fell 0.2 percent to about 81.70
yen