* Dollar struggles, euro not far from 14-month high
* Analysts say Fed thought likely to keep rates low
* Market watches euro zone meeting for FX comments (Updates prices, adds comment, adds detail
By Nick Olivari
NEW YORK, Oct 19 (Reuters) - The dollar hovered near a 14-month low against the euro on Monday as investors bet the Federal Reserve will hold U.S. interest rates near zero well into the coming year.
Though the U.S. economy is expected to have exited recession in the third quarter, investors expect rising unemployment will keep the Fed from lifting interest rates quickly. That would diminish the dollar's appeal and encourage investors to buy higher-yielding, higher-risk currencies and assets instead.
The euro traded within half a cent of $1.50, a level not seen since August 2008.
"The dollar remains a victim of U.S. fiscal and monetary policies," said Andrew Bekoff, chief investment officer for Family Office Group in New York. "The current Federal Reserve policy remains accommodating. This serves to keep rates low and spending by the government high."
High-yielding currencies such as the Australian and New Zealand dollars hovered near multimonth highs against the greenback while U.S. earnings optimism lifted Wall Street.
The euro rose as high as $1.4965, according to Reuters data,
and was last at $1.4942
"The global growth story is getting better. The U.S. economy has improved, so everyone is selling dollars and buying emerging markets. The data justifies the risk," said Sebastien Galy, senior currency strategist at BNP Paribas in New York.
Traders were on the lookout for possible remarks on euro strength and dollar weakness at a gathering of euro zone finance officials in Luxembourg, although analysts said the group was unlikely to significantly talk down the euro. [ID:nLJ707781].
"Maybe we will discuss the euro, but it's not the main focus point this evening," said Austrian Finance Minister Josef Proell. [ID:nLJ64613]
On a trade-weighed basis, the euro
YEN, AUSSIE GAIN; STERLING STRUGGLES
The dollar was down 0.3 percent at 90.60 yen
The Reserve Bank of Australia raised rates to 3.25 percent this month, the first major central bank to hike rates since the global economic crisis began.
Sterling climbed to a four-week high against the dollar on Monday, with market positioning, strength in global stocks and a report on the UK housing market all helping the pound claw back earlier losses.
Sterling had traded lower against the dollar and euro for most of the European session on Monday after a Bank of England policymaker said the central bank should continue its quantitative easing programme because the financial system has yet to fully recover.
Sterling last traded up 0.1 percent against the dollar at
$1.6368
The New York Fed added to dollar woes on Monday when it said reverse repo tests did not mean it was ready to use this tool to drain money from the banking system.[ID:nNYS005510]
In a reverse repo, the Fed sells assets such as Treasuries for cash with an agreement to buy them back later, effectively tightening policy by draining money from the banking system.
The Fed has also been buying assets such as mortgage-backed debt, and some analysts said it could lend the dollar modest support by winding down those purchases while still holding rates near zero.
"Such a move would steepen the yield curve and make the dollar more attractive versus the yen on an interest rate differential basis, possibly pushing the pair to 95 yen," said Boris Schlossberg, research director at GFT Forex in New York.
Comments from Federal Reserve Chairman Ben Bernanke had little impact on currency markets.
Bernanke on Monday said that the performance of the dollar and the U.S. economy will depend on the government's success in controlling the country's budget deficit. [ID:n19241643]. (Reporting by Nick Olivari and Steven C Johnson; Editing by Kenneth Barry)