* Canadian dollar edges down as Trudeau election victory
apparent
* ECB will meet on Thursday and could signal future steps
* Dollar index well above from last week's 7-week lows
By Lisa Twaronite
TOKYO, Oct 20 (Reuters) - The dollar gave back some of its
overnight gains against the euro on Tuesday after marking a
10-day high ahead of this week's European Central Bank meeting,
which some investors believe could set the stage for additional
stimulus later this year.
The Canadian dollar, meanwhile, edged down against its U.S.
counterpart after Liberal leader Justin Trudeau apparently won a
stunning election victory over Prime Minister Stephen Harper's
Conservatives.
The euro inched up nearly 0.1 percent to $1.1335 EUR= ,
after dropping as low as $1.1306 on Monday, but its gains were
probably limited ahead of Thursday's ECB meeting as it comes
against a backdrop of deflationary pressure.
Lower oil prices helped push euro zone consumer prices into
negative territory last month, which some believe could prompt
the ECB to eventually expand or extend its asset purchase
programme.
Many economists believe such a move would be most likely to
come in December if the ECB's quarterly economic forecasts due
early that month prove disappointing.
Economists polled by Reuters expect the ECB to extend its
plan to buy 60 billion euros of assets a month of mostly
government bonds beyond its planned end-date of September 2016.
"We're thinking they'll probably extend that date, but
we're not expecting it until the December meeting," Jennifer
Vail, head of fixed-income research at U.S. Bank Wealth
Management in Portland, Oregon, said by phone.
"The extension is the most likely path for the ECB. I think
increasing the size of current purchases would be problematic,"
she said.
After the ECB, investors' main focus will be the U.S.
Federal Reserve's next policy meeting on Oct. 27-28.
Investors remain divided about whether the U.S. central bank
will deliver its first rate hike since 2006. Interest rate
futures indicated on Monday that traders were pricing in a 52
percent chance of the Fed raising rates in March 2016, according
to the CME Group (O:CME).
Fed officials have been sending mixed messages to markets in
recent weeks. Fed chair Janet Yellen and others have said they
expect a rate hike will be needed by the end of this year, while
some other officials have expressed caution in light of looming
risks that a slowing global economy could threaten the U.S.
outlook.
"I do see the time to start raising rates in the near
future, from my perspective," San Francisco Fed President John
Williams said in an interview on Bloomberg TV on Monday.
The yen, meanwhile, was treading water in its recent ranges,
as investors pondered whether or not the Bank of Japan would
take or signal further stimulus steps later this month to
bolster the flagging economic recovery.
The dollar was buying 119.50 yen JPY= , nearly unchanged
from late U.S. trade.
The dollar index, which tracks the U.S. unit against a basket
of six rival currencies, was slightly lower at 94.891 .DXY ,
though still well away from last week's seven-week low of
93.806.
In Canada, apparent victor Trudeau has pledged spend on
infrastructure to stimulate economic growth. He has also vowed
to raise taxes on high-income Canadians and reduce them for the
middle class.
The dollar was last up about 0.2 percent against the loonie
at C$1.3040.
"Once you leave that Canadian time zone, there's not a lot
of people seriously following the small nuances of economic
policy," said Bart Wakabayashi, head of foreign exchange for
State Street Global Markets in Tokyo.
"The hype is much more than the bite, but it's obviously
headlines to trade off. I think we'll continue to trade Canada
as a commodities currency more than any other factor."
"It wasn't that long ago that we were at par, and if you
look back and compare charts, it's pretty much all about
commodities and oil, so that link is very hard to shake off and
will continue to dominate dollar/CAD direction," Wakabayashi
said.
(Editing by Simon Cameron-Moore)