FOREX-Yen steadies after shock Japan GDP slide

* Yen bounced around after data disappoints, Tokyo stocks slide

* Dollar inches higher, seen in tight ranges ahead of Fed minutes

* Swiss franc grinds closer to central bank cap vs euro (Updates prices, adds more comment, Credit-Suisse note on franc)

By Patrick Graham

LONDON, Nov 17 (Reuters) - The yen recovered from seven-year lows against the dollar on Monday but remained under pressure having sunk across the board after shock data showed Japan's economy slipping back into recession.

The yen normally tends to rise as Tokyo's stock market falls and that logic dragged the yen steadily higher as the Nikkei index sank 3 percent in the hours following gross domestic product numbers showing a 1.6 percent annualised fall.

But the third-quarter data was so bad - consensus had been a 2.1 percent rise - that it also raised the prospect that the Bank of Japan will eventually print further quantities of money after a snap election many expect to be called this week.

London investors sold the yen for the dollar in the first hour of trading, prodding it 0.1 percent lower on the day at 116.34 yen. It was still well off the low of 117.06 yen hit overnight.

"People (in London) are doing a bit of position squaring after getting caught out by the scale of this surprise," said Daragh Maher, a strategist with HSBC in London.

"Initially I think people saw it as equities positive, yen negative, given the prospect that they will have to do more to stimulate the economy."

DOLLAR PAUSE

The dollar index, a gauge of its strength against a basket of currencies, was flat for the first time in a month last week and the latest positioning data showed investors trimmed bets on the dollar against the euro last week even as they added to those on the greenback against the yen.

Most analysts agree the dollar is now firmly into a long-term rally that may continue for at least another year against its main peers, although many question the calls by some for the currency to reach parity with the euro thereafter.

"I'm not in the camp of significant euro weakness," Wayne Bowers, chief executive for EMEA and APAC at huge U.S. asset manager Northern Trust, told Reuters' annual Investment Summit.

"The fundamentals would and should indicate a stronger dollar than we've had. (But) I'm probably more comfortable in the $1.15-$1.25 range. That would be my target range for the next couple of years."

A rise in U.S. government bond yields helped the dollar gain around a quarter of a percent against the euro to $1.2491 but several analysts said the prospect of minutes from the Federal Reserve's last meeting on Wednesday may stave off any stronger moves in the near-term.

Another gathering storm is that over the Swiss franc, pressed lower over the past fortnight to within spitting distance of the Swiss National Bank's three-year-old cap of 1.20 francs per euro.

Credit Suisse (NYSE: CS - news) said in a note there was no evidence the SNB had intervened in the market's steady grind to a high of 1.20105 francs on Monday. (Editing by Ralph Boulton)