Dollar gains vs yen after Japan reminders

Japan finmin says to take decisive FX steps if needed

* Dollar steadies, euro stays below $1.40

* Swedish crown falls after central bank hikes rates

(Updates prices; changes byline, dateline; previous TOKYO)

By Jessica Mortimer

LONDON, Oct 26 (Reuters) - The dollar gained against the yen, holding above its 1995 record low on Tuesday following reminders from Japanese officials about the possibility of more steps to curb yen strength.

The U.S. currency steadied against other currencies, with the euro stuck below $1.40 as market participants pondered how much monetary easing the Federal Reserve would opt for and how much may be priced in to an already weak U.S. currency.

Helping steady the dollar were comments by New York Fed President William Dudley overnight, who said the economic context would determine whether an incremental or big bang approach to asset purchases was better. [ID:nN25186345]

The market was also wary about pushing the dollar lower versus the yen due to worries about possible intervention after Japanese Finance Minister Yoshihiko Noda said Japan would take decisive steps on forex when needed. [ID:nTKF107056]

At 0746 GMT, the dollar was up 0.5 percent at 81.15 yen JPY=, with traders citing talk of Japanese investors buying to take it above reported stop losses at 80.90 and 81.05 yen.

The dollar's record low of 79.75 yen has become a focal point. It hit a 15-year trough at 80.41 yen on Monday, with players wary Japan may intervene if it nears 80.00.

"There has been some verbal intervention to stem the advance of the yen, but it's a case of when not if we get a squeeze back down towards the 80 (yen) area," said Jeremy Stretch, currency strategist at CIBC.

"The dollar is in a bit of a holding pattern. The market is still mulling over the U.S. QE (quantitative easing) story and dollar selling is a bit less of a one-way bet than it was."

The Bank of Japan, which acts on behalf of the Ministry of Finance, intervened on Sep. 15 for the first time since 2004 to sell the yen. The greenback has fallen broadly since then as the market has priced in more Federal Reserve quantitative easing.

(source:reuters.com)