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* Q3 underlying pretax profit 1.4 bln stg vs f'cst 1.25 bln
* Q3 investment bank profit 463 mln stg vs 988 mln stg
* Barclays shares up 2.5 percent
* CEO cautious about operating environment
By Steve Slater and Matt Scuffham
LONDON, Oct 30 (Reuters) - Barclays said it wascooperating with regulators investigating the possiblemanipulation of currency trading by major banks, deepeningscrutiny of the bank's practices as it grapples with a slump ininvestment bank income.
Barclays, Britain's third-biggest bank by market value, saidon Wednesday it was reviewing its foreign exchange trading"covering a several year period" and was cooperating withauthorities investigating possible attempts to manipulatecertain benchmark currency exchange rates.
Several banks are under the spotlight over alleged riggingin the $5.3 trillion-a-day foreign exchange market, and UBS and Deutsche Bank said on Tuesday they werecooperating with regulators.
The investigation adds to a string of probes faced byBarclays boss Antony Jenkins, who took over as chief executive14 months ago and is trying to rebuild his bank's reputationafter a series of scandals while trying to withstand a tradingslowdown in its core bond market.
Barclays reported underlying pretax profit of 1.4 billionpounds ($2.3 billion) for the three months to the end ofSeptember, down from 1.9 billion a year ago but above an averageforecast of 1.25 billion from analysts polled by the company.
Profits at its investment bank fell to 463 million poundsfrom 988 million a year ago and below expectations.
It was the unit's lowest profit since the end of 2011 andwas largely due to a 44 percent slump in revenue from fixedincome, currency and commodities in the latest quarter.
Activity across banks has been hit by uncertainty over U.S.monetary policy, but Barclays' performance was worse than mostof its biggest rivals.
Barclays shares were up 2.5 percent at 272.8 pence by 0812GMT, as analysts said bad bond trading had been expected and theabsence of any new provisions for mis-selling was positive.
"Barclays is at a stage where management attention in themedium term will largely be focused on fixing the deleveragingprocess and boosting capital levels," said Bernstein analystChirantan Barua. "Meanwhile (the) fixed income outlook globallyremains muted in the medium term."
Barclays raised 5.8 billion pound in a rights issue lastmonth to meet a capital shortfall identified by its regulator.The bank said that, including the fundraising, its common equityTier 1 capital ratio improved to 9.6 percent, based on fullBasel capital rules that are being phased in.
The UK regulator said banks must meet a leverage ratio - ameasure of its capital to assets - of 3 percent. Barclays saidthe rights issue would lift its leverage ratio to 2.9 percent,or 2.6 percent based on the same criteria used by the regulator.
It plans to retain earnings and sell more assets to helpreach the target.
Jenkins said he was pleased with progress in turning thebank around, but remained cautious about the operatingenvironment.
