* Euro recovers from lows, gains vs dollar
* Dlr index seen capped by accomodative Fed policy
By Anirban Nag
LONDON, April 26 (Reuters) - The euro recovered against the dollar on Tuesday, helped by demand from sovereign investors, with expectations that the U.S. Federal Reserve will keep policy accommodative likely to see it hover near its recent peaks.
Some investors had earlier used comments from European Central Bank President Jean-Claude Trichet on the need for a strong dollar as an excuse to cut long euro positions.
But many traders said the dollar would remain under pressure from the perception the U.S. central bank is far more reluctant to tighten its policy any time soon -- compared to an ECB that has already begun to raise interest rates
"Any rise in the dollar is a good opportunity to sell it since it should remain weak unless the Fed signals it wants to tighten monetary policy," said Adam Myers, senior forex strategist at Credit Agricole.
"We do not see (Fed chief) Bernanke doing that tomorrow."
The euro was up 0.1 percent at $1.4595, not far from a 16-month high of $1.4649 hit last week. It gained from a session low of around $1.4494 on steady buying by Middle East investors and Asian central banks, traders said.
The euro has support at $1.4486, a weekly high hit earlier in April, but more significant support levels are further away. One such support lies at $1.4403, the 50 percent retracement of the euro's rally to $1.4969 from $1.4156.
The euro has been rising this year and was seen due for a pull-back. Data from U.S. Commodity Futures Trading Commission showed speculators' long positions in the currency were still near a three-year high on the Chicago futures exchange.
Indeed, some market players said the euro's drop earlier and the dollar's rise was mainly due to investors trimming their positions ahead of the Fed's two-day policy meeting that starts on Tuesday.
"Basically, today's price action is just a matter of people squaring up ahead of the FOMC," said Mirza Baig, senior currency strategist with Deutsche Bank in Singapore.
The euro zone's problems with sovereign debt are also a key risk factor. Spain will sell three- and six-month Treasury bills on Tuesday and investors will watch for signs of weakness after peripheral debt came under pressure across the board last week on growing talk that Greece would restructure its public debt.
The dollar was flat against a basket of major currencies to 73.945, off a three-year low of 73.735 hit last week.
FOMC MAY NOT HELP DOLLAR
The Fed is expected to say on Wednesday it will stick to its plan to complete a $600 billion bond-buying programme in June, factor that has been at the heart of the dollar's recent fragility.
The post-meeting news conference by Chairman Ben Bernanke on Wednesday will be the first regularly scheduled briefing by a Fed chief in the bank's 97-year history.
Traders expect Bernanke to avoid dropping any hints of an immediate plan to tighten the bank's policy and Citi said in a note that those looking for a Fed-driven interruption in the dollar's downtrend may be disappointed.
"The Fed is unlikely to directly oppose dollar weakening; Fed hawkishness cannot be relied upon to support (the) dollar since global yields have tended to at least keep pace with higher U.S interest rates during periods of rising risk appetite. The dollar is still not the currency of choice," it said.
It added that risks stemming from short dollar positioning were overstated.
Against the yen the dollar slipped to a four-week low of 81.56 yen, before recovering to trade at 81.77 yen in European trade.
The Australian dollar was down 0.1 percent to $1.0712 as commodities faltered, with spot silver tumbling by more than 4 percent at one point after having risen to within a whisker of a 1980 record high the previous day.
(Additional reporting by Hideyuki Sano in Tokyo; editing by Patrick Graham)