* Dollar trades in a tight range as investors cautious

* Midterms could hinder Trump’s fiscal stimulus, hurt dollar

* Pound falls on N. Ireland lawmaker "no-deal" Brexit
comments

* Reserve Bank of Australia holds rates steady at 1.5
percent

* Graphic: World FX rates in 2018 (Adds quote, updates prices)

By Tom Finn

LONDON, Nov 6 (Reuters) – The dollar edged up on Tuesday but
its gains were limited by investor caution about the U.S.
midterm elections and any fallout for the world’s largest
economy.

The greenback has outperformed most major currencies this
year, benefiting from the robust U.S. economy and rising
interest rates.

Investors are focused on whether congressional elections –
the results of which are expected from 2300 GMT -could disrupt
the stellar run of the world’s most liquid currency.

The elections are expected to help the Democratic Party win
control of the U.S. House of Representatives, with Republicans
likely to retain their majority in the Senate. Analysts believe a divided Congress will see the dollar dip
because it is unlikely that any new fiscal stimulus could be
launched to counterbalance forecasts of slowing U.S. economic
growth next year.

That, in turn, would boost emerging market currencies
hindered this year by higher U.S. rates, in particular those
currencies running big external imbalances such as Turkey,
Argentina and South Africa.

But some analysts warn that an unexpected outcome could
trigger an unwinding of long positions on the dollar which has
rallied more than 7 percent from April lows against its rivals.

"Polls have been wrong before …. Should the Republicans
surprisingly hold Congress, the dollar, equities and Treasury
yields would get a lift on the promise of Trump 2.0," said ING
FX strategist, Petr Krpata.

The uncertainty kept investors from making big moves on
Tuesday.

"Markets are in a holding pattern," said Credit Agricole
head of G10 FX Strategy Valentin Marinov.

"Yes, some traders might take profits on extended dollar
long positions but we’re not expecting a big or immediate impact
whichever way the election goes," he added.

The dollar index , a gauge of its value versus six
major peers traded up 0.2 percent at 96.446. It had hit a
16-month high of 97.20 last week.

The euro was slightly lower at $1.1392, about one
percent above this year’s trough of $1.1301 touched on Aug. 15.

Euro zone finance ministers called on Italy overnight to
change its 2019 budget to conform with European Union rules
before a deadline set for next week, but Rome dug in its heels
saying its disputed deficit plan would not change. Sterling sank after a senior member of the Northern Irish
DUP party said on Tuesday it looked like Britain would leave the
European Union without a divorce deal. The pound erased earlier gains after the comments and fell
to a five-month low versus the euro of 87.19 pence, down 0.2
percent on the day. The latest comments indicate that Prime Minister Theresa May
may struggle to get a deal through Parliament. With less than five months before Britain leaves the EU,
investors are growing anxious and sterling is moving sharply on
any news of a possible breakthrough.

There was muted reaction in the Australian dollar to the Reserve Bank of Australia’s widely anticipated decision
to keep interest rates steady on Tuesday. The Aussie later rose 0.3 percent to $0.7240. It is trading
around 2.7 percent above a more than 2-1/2-year low of $0.7018
touched on Oct. 26.

(Editing by Matthew Mpoke Bigg)

tom.finn.reuters.com@reuters.net))

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