* Dollar index down 0.3 percent at 80.04 before Fed
* Focus on Fed's economic outlook, possible more dissent
* Euro hits session highs above $1.37 after German ZEW data
* Yen pressured on speculation of more BOJ easing
By Tamawa Desai
LONDON, March 16 (Reuters) - The dollar dipped on Tuesday with markets anticipating the U.S. Federal Reserve will keep policy unchanged, but wary of any upside surprises.
The policy-setting Federal Open Market Committee was expected to reiterate its vow to keep interest rates very low for an "extended period", with the market focused on the Fed's assessment of the economic outlook.
The U.S. central bank was also expected to confirm the completion of its purchases of mortgage-backed securities and agency debt by the end of the first quarter, but keep the option for further buying should conditions deteriorate.
Of prime interest was whether there would be more dissenters wanting to drop the "extended period" reference after recent economic data showed U.S. consumers are buying more and firms seem ready to hire again.
By 1128 GMT, the dollar index, a gauge of its performance against six major currencies, was down 0.3 percent at 80.044, with near term resistance seen around 80.85, its March 10 high.
Another focus was whether the Fed would begin laying the groundwork for a shift in the "extended period" language. The vast majority of primary dealers see a change as early as April.
Still, most do not see an interest rate increase until the second half of this year.
"The market looks about right in pricing November as the start of the Fed tightening cycle, but the prospect that excess liquidity is withdrawn earlier suggests the risk to U.S. yields and the dollar remains to the upside," said Chris Turner, head of FX strategy at ING.
The euro was up 0.3 percent at $1.3715.
The single currency touched session highs against the dollar and yen after data showed German ZEW institute's economic sentiment index came in higher than expected.
EURO UPSIDE HEAVY; BOJ EYED
Concerns about an immediate meltdown over Greece's massive debt have eased as euro zone finance ministers on Monday agreed on a plan to help Greece if needed.
But with little known about the plan's details, underlying sentiment toward the euro remained cautious.
"Only a complete plan, which defines not just the aid payments but also the conditions it is linked to, the control mechanisms and the sanctions to be taken in case the conditions are breached, would have the potential of causing a sustainable correction in euro/dollar," Commerzbank analysts said in a note.
Against the yen, the dollar rose 0.2 percent to 90.68 yen, while the euro gained 0.5 percent to 124.37 yen.
The yen has come under pressure on speculation the Bank of Japan is leaning towards monetary easing steps this week, but that was partly offset as Japanese firms repatriated funds ahead of the financial year-end on March 31.
The BOJ ends its two-day meeting on Wednesday and is likely to announce more easing measures, like boosting the size or duration of special fund-pumping operations.
The Australian dollar was up 0.2 percent against the dollar at $0.9160 after Reserve Bank of Australia policy meeting minutes showed it expected to keep hiking rates gradually towards normal levels.
Tensions over China's currency practices brewed after a letter by 130 U.S. lawmakers on Monday called on the Obama administration to get tough with Beijing, a day after Chinese Premier Wen Jiabao brushed off accusations of currency manipulation.
(Additional reporting by Jessica Mortimer, editing by Nigel Stephenson)