By Dennis Pettit

NEW YORK, Sep 21 (MNI) - The dollar was nursing slight losses vs. the euro and the yen in afternoon dealings Monday, with the greenback unable to hold on to solid gains notched against both currencies at the start of the session and falling victim to an ongoing "sell rallies" dictum that drives current trading.

Euro-dollar was changing hands at $1.4687 in quiet afternoon dealings Monday, at the upper end of the day's $1.4611/1.4702 U.S. hours range, the euro easing slightly from its best level of the session seen just after midday.

Euro-dollar began the U.S. session around $1.4660.

Dollar-yen meantime was changing hands around Y92.05 in afternoon dealings, a bit below its Y92.25 starting level of the day and in the lower half of the day's Y91.82/92.55 U.S. hours range.

Afternoon dealings were muted and followed a relatively modest start to the week, the dollar able to score gains in overnight trading, beginning in Asian and extending into European hours, although flows in those centers were also modest with Japanese markets closed for public holidays.

And dollar gains extended quickly in early U.S. trading, the greenback seeing its best levels of the session against the euro and the yen by around 9:00 a.m. EDT, then spending the balance of the morning giving up those gains as players quickly booked profits.

Traders said that the early dollar buying appeared to be a push to squeeze out dollar shorts set ahead of, and just after the weekend, but when the greenback failed to extend those gains to below $1.4600 and substantially above Y92.50, the buyers quickly turned tail.

Euro-dollar marked its high of the U.S. session, and dollar-yen its low, just ahead of midday.

Traders say that the greenback's modest gains at the start of the week likely represent a paring back of positions ahead of key events that could shape the dollar's nearby course.

Beginning Tuesday, the Federal Open Market Committee holds a two-day meeting on monetary policy and is expected to keep rates unchanged at the current record low level, but trader focus will be on any steps that the Fed chooses to describe on how it will approach the thorny issue of how to withdraw the current easy credit that has help revive the U.S. economy.

Any such steps are not expected to be implemented any time soon, given the still fragile state of affairs in the U.S., but traders will be on alert for any signs that credit withdrawal may be nearing.

Also on tap for this week, the Thursday-Friday G20 Summit in Pittsburg, PA where leaders of the top 20 industrial nations will convene to discuss the global economic crisis and the still ailing global financial infrastructure.

While the meeting is not expected to bring fresh impetus to currency issues, traders will be carefully watching that meeting from any fresh initiatives to reign in incentive pay.

U.S. economic data released Monday had little lasting impact on trading.

The August Leading Economic Indicators index rose 0.6% in its fifth gain, signaling recovery.

Coincident indicators were unchanged.

Summaries:

EURO SUMMARY: Opened at $1.4660 after $1.4636/1.4713 overnight range.

-- Dollar enjoyed an uptick overnight amid light flows over a Tokyo holiday but euro managed to claw back losses slightly for trade to $1.4670 as the US session got underway. With known supply capping, euro retreated easily, pressing to fresh lows for the session and triggering stops on a break of $1.4630, momentum eventually allowing low prints at $1.4611 before stability returned. US and UK names said conspicuous sellers on the slide as model and momentum accounts sold. With bids ahead of $1.4600 as a cushion, euro rebounded to $1.4635 before spiking to $1.4660 on a quick shortsqueeze. A brief pause for breath resolved with gains to $1.4702 after the London fixing event, backdrop including improved stock picture and dollar losses elsewhere, but euro retreated to $1.4670 in early afternoon, chopping inside $1.4670/90 for the balance of the session.

YEN SUMMARY: Opened at Y92.27/135.27 after Y91.31/92.35 and Y134.19/135.30 overnight ranges.

-- Dollar had pressed higher in European trade after quiet Asian hours trading due to a Tokyo holiday but early dollar strength across the board allowed dollar-yen to squeeze quickly higher for trade to Y92.55 in early going as stops were flushed above Y92.50 offers, euro-yen lifting to Y135.49 as stops atop Y135.50 were targeted. Both turned lower from there, euro-yen chopping quickly to Y135.10 while dollar-yen took a more leisurely drift to Y92.35, both then retreating further for Y92.20/135.10 ahead of the London fixing event. Broad dollar slippage allowed prints at Y91.82/134.90 by midday with afternoon trade seeing dollar regain Y92.00 but stall at Y92.15, ending near Y92.05 as euroyen recovery lifted to Y135.30 before ending near Y135.20.

Dollar Rates in New York Trade:

Eur-Dlr Dlr-Yen Eur-Yen Stg-Dlr Dlr-Swiss 3:29 p.m. Mon 1.4687 92.06 135.23 1.6217 1.0318 1:58 p.m. 1.4682 92.05 135.15 1.6201 1.0325 12:27 p.m. 1.4682 91.94 134.98 1.6220 1.0322 10:54 a.m. 1.4655 92.20 135.18 1.6180 1.0352 9:24 a.m. 1.4624 92.41 135.14 1.6171 1.0383 7:19 a.m. Mon 1.4660 92.27 135.27 1.6183 1.0352 3:01 p.m. Fri 1.4720 91.35 134.50 1.6275 1.0285

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