FOREX-Dollar bides time ahead of ECB, Brexit woes hit sterling

* Euro softens into Thursday's ECB meeting
* Pound edges lower on fresh worries about hard Brexit
* Graphic: World FX rates in 2020 https://tmsnrt.rs/2RBWI5E

By Tom Westbrook and Eimi Yamamitsu
SINGAPORE/TOKYO, Sept 8 (Reuters) - The dollar held steady
on Tuesday as investors weighed whether an accommodative turn
from the European Central Bank later this week could hit the
euro, while the pound nursed losses due to Brexit uncertainty.
A day after thin holiday trade, the greenback was slightly
stronger against a basket of currencies =USD at 93.128 and
firmed marginally against the euro EUR=EBS at $1.1809.
Moves in the Asian day were modest, but had the dollar back
under gentle pressure as risk appetite appeared to return to
equity markets. MKTS/GLOB
The Australian dollar AUD=D3 stood at $0.7276 and the New
Zealand dollar NZD=D3 was little changed at $0.6685, having
hit lows overnight following a Sunday statement from the central
bank which again raised the prospect of negative rates. AUD/
The main focus this week is on the European Central Bank's
policy decision on Thursday.
Most analysts don't expect a change in the central bank's
policy stance but are looking to the message on its inflation
forecasts and whether it seems concerned by the euro's strength.
The meeting comes after the single currency marked a
two-year high just above $1.20 at the beginning of the month,
until comments about its level from ECB chief economist Philip
Lane knocked it lower.
"The ECB could raise more concerns over a further
appreciation in the euro and make some downward revisions to its
inflation projections," said Commonwealth Bank of Australia
currency analyst Kim Mundy, which would flag easier policy.
"In our view, the dollar can lift further over the remainder
of the week because of the possibility the ECB takes a sharper
dovish turn."
Elsewhere, the dollar traded firmly against the Japanese yen
amid talk of a snap election - something that Yoshihide Suga,
frontrunner to succeed Shinzo Abe in next week's leadership
ballot - signalled in a newspaper interview. Analysts say many currency market participants no longer
consider the leadership race as a catalyst, as the next leader
is likely to follow Abe's policy path.
"Around eight years ago (when Abe took over), the yen was
stronger at around 70 per dollar. But with the current
dollar/yen level, there's nothing much the successor can do
currency-wise," said Daisuke Karakama, chief market strategist
at Mizuho Bank.
"The stronger local equity market should be more of a
concern instead," he said.
The yen JPY=EBS last changed hands at 106.29 per dollar.
The British pound GBP= , meanwhile, was the laggard amid a
fresh crisis in EU-UK trade negotiations. GBP/
A Financial Times report suggesting Britain might legislate
to override its Brexit withdrawal agreement prompted the EU to
warn there would be no deal if that happened, raising the
prospect again of a hard Brexit. New talks are due to begin in London later on Tuesday.
The pound edged 0.2% lower to $1.3146, after shedding 0.8%
overnight, and sat a fraction above a two-week low against the
euro at 89.76 pence EURGBP= .
Some traders also sold sterling against the yen GBPJPY= ,
last traded at 139.63, hovering near a two-week low of 139.58 it
hit in the previous session.
"The key question for markets is whether the remarks are
still mostly brinkmanship as negotiations near the finish line,"
said NAB economics director Tapas Strickland. "The mild market
reaction suggests markets think so and still sniff a deal."
Meanwhile, data in Australia showed employment eased over
the month to Aug. 22, while last month's business confidence
gained but remained fragile. Japan's economy shrank an annualised 28.1% in April-June,
worse than the initial estimate of a 27.8% contraction, revised
data from the Cabinet Office showed on Tuesday. Final European GDP figures are due later in the day.

(Editing by Richard Pullin and Jacqueline Wong)