SYDNEY (Reuters) - The U.S. dollar held steady in early Asian dealings on Friday after a volatile session in New York but was seen supported with investors likely to trim short positions on caution ahead of a G20 finance ministers meeting.

An employee of the Korea Exchange Bank counts one hundred U.S. dollar notes during a photo opportunity at the bank's headquarters in Seoul April 28, 2010. REUTERS/Jo Yong-Hak

While no one seriously expects a resolution to the vexed question of competitive depreciation at the meeting in South Korea, Shaun Osbourne, chief FX strategist at TD Securities in Toronto, said a statement downplaying the notion of a currency conflict could offer the dollar a little support.

“That might be about as much as we can expect this weekend. The difficult decisions will be punted down the road,” he said.

Indeed, an informed source said G20 officials were unlikely to reach an accord rejecting currency devaluations and capping current account balances after U.S. proposals ran into stiff opposition.

Against the Japanese currency, the dollar was at 81.33 yen, versus 81.32 yen late in New York, but off a 15-year low at 80.84 set on EBS on Wednesday.

“People are just not quite sure what Japan’s tactics are on the currency and how afraid they should be. But clearly there is a little bit of unease about putting on a fresh short position from here,” said Sean Callow, currency strategist at Westpac Bank in Sydney.

The euro, which failed to sustain gains above key resistance at $1.40 twice this week, was last at $1.3912 and expected to be hemmed in the prevailing $1.3650 and $1.4150 range as investors wrestled with uncertainty over the size of expected U.S. monetary easing.

European central banker Christian Noyer said there was no problem with the euro at its current level, and to call the single currency overvalued was an “over simplification.

Prospects for the Federal Reserve pumping more money into the economy next month, likely through direct purchases of Treasury debt, have pushed the dollar down more than 7 percent against major currencies since September.

The U.S. dollar index .DXY, which tracks the greenback versus a basket of six major currencies, was last at 77.475, having bounced off a low of 76.844 on Thursday. But it was still well off highs around 83.000 seen last month.

Further downside for the dollar index may be limited with a series of support levels looming, including the January trough of 76.601 and 76.1 -- key support of the 2008, 2009 and 2010 lows, according to RBC.

“Another downleg in DXY would require taking out these thresholds, which would likely require another round of distinct USD bearishness,” said David Watt, senior currency strategist at RBC Dominion Securities in Toronto.

Comments from Fed official James Bullard, who said he would favor Fed purchases of Treasury securities in $100 billion increments one Fed meeting at a time if the U.S. central bank decided monetary easing was necessary, was seen as a slight positive for the dollar as it helped eased worries about bigger purchases.