* U.S. dollar slides across the board ahead of Fed, G20
* Fed outlook weighs on dollar; euro at 1-year high
* Market sentiment firmly to sell dollars on any rally
* New Zealand dollar soars to 13-month high vs greenback (Updates prices, adds comment, changes byline)
By Wanfeng Zhou
NEW YORK, Sept 22 (Reuters) - The dollar dropped broadly on Tuesday, hitting a one-year low against the euro as optimism about a global economic recovery dented safe-haven demand ahead of a Federal Reserve meeting and Group of 20 summit this week.
Traders took advantage of a dollar rally in the prior session to sell on views the Federal Open Market Committee will on Wednesday signal plans to maintain loose monetary policy well into 2010 to promote the recovery.
Currency investors are also eyeing a meeting of G20 leaders on rebalancing the global economy in Pittsburgh this week, a process that would almost certainly require a weaker dollar.
"We had very thin trading conditions. There's a lot of skittishness ahead of the FOMC rate decision," said Kathy Lien, director of currency research at GFT Forex in New York.
Comments from U.S. Treasury Secretary Timothy Geithner that the U.S. economy appeared to be picking up steam also encouraged investors to take on risky trades.
"We're seeing pretty optimistic comments from U.S policy makers and that's adding to the risk appetite we have in the market," Lien added.
In late trading, the euro was up 0.8 percent at $1.4796 after options-related demand and strong Asian buying pushed it above $1.48 for the first time since September 2008.
With no major economic data on the calendar, traders said $1.4825 may be the next target in euro-dollar, with many predicting an eventual move back to $1.50.
The dollar fell 0.9 percent to 91.14 yen and 0.8 percent to 1.0231 Swiss francs, near a 14-month low touched earlier.
Sterling rose 1 percent to $1.6359, while the New Zealand dollar jumped 1.9 percent, after earlier climbing more than 2 percent to hit a 13-month high after dairy exporter Fonterra raised its estimated payout to farmer shareholders. Fonterra accounts for about 7.0 percent of the New Zealand economy.
DOLLAR IN FOCUS AT G20?
A document obtained by Reuters showed how Washington would urge G20 leaders to launch a new push this year to get debtor nations like the United States to save more and exporters like China, Germany and Japan to spend more.
"If you take the view that too much of U.S. growth has been domestically driven, the next logical step is to say an orderly decline of the dollar -- it's not in anyone's interest to see a collapse -- in many ways makes sense," said Tom Fitzpatrick, chief technical analyst at Citigroup in New York.
"And at the end of the day, the U.S. has a zero interest rate policy and the highest fiscal deficit in peacetime while (foreign investors) are holding a lot of dollars, so the path of least resistance for the dollar is down," he added.
The ICE Futures U.S. dollar index, which tracks the greenback versus a basket of six other major currencies, fell to a one-year low of 76.003 and was last down 0.9 percent at 76.073. The index has declined about 2.4 percent so far this month.
European Central Bank Governing Council member Axel Weber said on Tuesday recent moves in currency markets were "not out of line" given the euro zone's economic performance relative to other areas.
Some said this suggested the ECB was comfortable with the euro's level and was a green light to push it even higher, especially in light of the U.S. proposals to put fixing global imbalances on the G20 agenda.
But others said there is still a risk of dollar bearishness engulfing the market and selling turning into a rout.
"A discussion at the G20 on currencies, and especially the dollar, is not only appropriate but essential, as this move could accelerate swiftly," said Maurice Pomery, managing director at Strategic Alpha in London. (Additional reporting by Leah Schnurr; Editing by James Dalgleish)