* Dollar index flat at 76.115 <.DXY> after hitting 1-yr low
* Fed likely to indicate rates to stay low for some time
* Stg up as no talk of cutting deposit rate in BoE minutes
* NZD surges on unexpected Q2 growth
(Releads, adds quote, BoE minutes, updates prices)
By Tamawa Desai
LONDON, Sept 23 (Reuters) - The dollar was in a holding
pattern after falling to its lowest in a year against a basket
of currencies on Wednesday, awaiting a U.S. Federal Reserve
policy decision expected to keep interest rates at record lows.
The policy-setting Federal Open Market Committee's decision,
due around 1815 GMT, was expected to show interest rates would
remain low for some time, but may also signal a scaling back in
some Fed operations that have provided massive liquidity to the
banking system after it seized up a year ago.
"We think the Fed is unlikely to communicate any near-term
reversal of its exceptionally accommodative monetary policy,"
said Geoffrey Kendrick, currency analyst at UBS.
The dollar index, which tracks the performance of the
greenback versus a basket of six other major currencies, was
flat at 76.115 <.DXY> by 1228 GMT. It had earlier hit a low of
75.892, a level not seen since last September. Charts indicate
the next support level at around 74.70.
The index has shed more than 2.5 percent this month as
speculators sold the dollar on rising confidence in a global
recovery and expectations U.S. policymakers will keep interest
rates at rock-bottom levels for some time.
Ahead of the Fed, minutes from the Bank of England's
monetary policy meeting earlier this month showed no members
voted for an increase in its asset buying plan and that cutting
the remuneration rate on bank's reserve deposits was not
discussed.
That prompted sterling to rally to session highs against the
dollar and euro, as market players scaled back expectations for
more monetary easing in the immediate future.
Sterling <GBP=D4> rose about half a percent on the day to a
session high of $1.6449, jumping a full cent after the minutes
were released. The euro <EURGBP=D4> fell 0.5 percent to the
day's trough of 89.98 pence.
KIWI SURGES
The New Zealand dollar surged to its highest in 13 months
against the U.S. currency after the economy unexpectedly pulled
out of recession in the second quarter. The kiwi <NZD=D4> rose
to $0.7315, its highest since early August 2008. It was last at
$0.7255, up 0.9 percent on the day.
The euro <EUR=> was flat on the day at $1.4780, having risen
earlier to a one-year high of $1.4843 on trading platform EBS.
Traders cited talk of a digital option in the euro at $1.48,
where the option holder is in line for a payout of 10 million
euros if the spot market rate is at that level or higher at the
option expiry later in the day.
Higher than forecast purchasing managers' indexes for euro
zone manufacturing and services activity [] and
industrial new orders [] had little impact as the
market had largely priced in improvement in the sectors,
analysts said.
Against the yen <JPY=>, the dollar fell as low as 90.47 yen
on EBS before recovering to 91.23, up 0.1 percent on the day.
The dollar fell to a seven-month trough of 90.12 yen last
week, nearing the psychologically important 90 yen level.
Traders will also keep an eye on a Group of 20 leaders'
summit, which begins on Thursday and is expected to call for
economic stimulus plans to stay in place, a move which could
give a boost to riskier assets. []
(Additional reporting by Emelia Sithole-Matarise, editing by
Nigel Stephenson)
