FOREX -D-Day for euro as market awaits ECB quantitative easing

* Euro inches higher in Europe ahead of ECB press conference

* Bank seen announcing 50 bln euros in bond-buying monthly

* Danish central bank intervenes heavily to weaken crown

* Swiss franc also up ahead of decision (Adds Danish central bank intervention against crown)

By Patrick Graham

LONDON, Jan 22 (Reuters) - The euro held more than a cent above 11-year lows on Thursday as uncertainty over how it will move surged to the highest in years ahead of a press conference at which the European Central Bank is expected to announce a major bond-buying plan.

Traders and strategists at the major banks say an extended quantitative easing programme, outlined by Reuters and other news services on Wednesday, is fully priced-in to the current value of the euro.

That argues for a clearing out of many of the bets on the currency weakening against the dollar that have made money for investors over the past six months and the euro rose almost a cent on Wednesday.

But traders also say conviction that the single currency is headed broadly lower over the next year means most will tend to sell into that sort of rally. After some early losses in Europe, it had inched up 0.1 percent on the day to $1.1622.

"The market is convinced the euro will continue to fall, but (also) that the best strategy is to sell into rallies - given this intention, I struggle to see euro strength getting out of hand," Josh O'Byrne, a strategist with Citi in London, said.

"Short euro is still not as heavily positioned a trade as some people think."

The ramifications of ECB bond-buying are extensive and the run-in has made for one of the most active and volatile weeks in major currency markets in years.

Options measuring overnight euro-dollar volatility surged to almost 40 percent, more than 10 times rates seen through most of the past two years and double those a day earlier.

The Swiss franc, up almost 20 percent since the Swiss National Bank (NYSE: NBHC - news) removed its cap on the currency against the euro last week, gained more than half a percent in early European trade. It had handed back some of those gains by 1008 GMT, trading 0.2 percent higher at 99.66 francs per euro.

"There is the suspicion that the SNB has been intervening intermittently (against the franc)," O'Byrne said. "But I think (in the context of the ECB) it might be reluctant to do so today and that may be helping the franc."

CROWN DOWN

Since the change in Swiss policy, some investors have shifted money towards another currency with a controlled rate against the euro - Denmark's crown.

In response, the Danish central bank is expected to cut interest rates for the second time this week if the ECB acts on QE on Thursday and traders said it intervened heavily to drive the crown to a 5-month low in morning trade.

"They have been intervening, but today they just started to hike the bids," said a senior trader at one Nordic Bank. "They started at 7.4345 crowns per euro and pushed it to 7.4430."

The crown, pegged to the euro, weakened as much as 0.25 percent, its largest single-day percentage drop in Reuters data beginning in 1999. It last traded at 7.4448 crowns, 0.13 percent weaker on the day.

Many major banks forecast the euro over the next 1-2 years heading to $1.10, or even to parity for the first time since the aftermath of its launch in the 1990s.

That reflects deep-rooted concern in Europe about the prospect of an era of very low growth, and possibly deflation, at a time when the United States seems to be recovering robustly.

There are doubts, however, about how much worse it can get for the euro. IMF chief Christine Lagarde and the chairman of Spanish bank Santander both told a panel at the World Economic Forum in Davos that the euro now looked fairly valued.

"In the short-term we could stay at these levels or go down a bit further," said Brian Jacobsen, a Chief Portfolio Strategist with Wells Fargo Asset Management.

"But let's face it: thereafter the German industries that were very profitable at $1.39 are only going to be more so at these levels. I think the euro will appreciate to $1.25, that's a reasonable valuation." (Editing by Toby Chopra/Hugh Lawson)