* Euro dips from 1-year highs, Aussie and kiwi fall
* Greenback gets respite ahead of long weekend in Asia
* Dollar index off 1-year lows, but downtrend seen intact
* GBP dips, source says FSA hinders Lloyds' asset scheme exit
By Masayuki Kitano
TOKYO, Sept 18 (Reuters) - The dollar rose against the euro on Friday, edging up from a one-year low hit the previous day, as investors covered short positions in the wake of the greenback's slide during the week.
The dollar has retreated broadly since March as investors shift into riskier assets due to increasing signs that the global economy is on the mend, and it extended its losses this week as equities and commodities rallied.
But the battered U.S. currency gained some reprieve on Friday as investors trimmed their positions ahead of holidays in Japan and Singapore next week, although the trend for broad dollar weakness was seen as likely to persist. "There is a lot of money sloshing around and that situation is likely to continue, since exit strategies are unlikely to be implemented very soon," said Akira Hoshino, chief manager for Bank of Tokyo-Mitsubishi UFJ's foreign exchange trading department.
"Money that had been parked in dollars has been seeping out gradually and that trend is continuing," he said.
The euro dipped 0.2 percent from late U.S. trading on Thursday to $1.4707. The euro, which hit a one-year high of $1.4768 on trading platform EBS on Thursday, has risen about 2.8 percent in the past two weeks.
The dollar edged up 0.2 percent against the yen to 91.30 yen, having rebounded from a seven-month low of 90.12 yen hit on Wednesday.
The yen reached that peak against the dollar after Japan's new finance minister, Hirohisa Fujii, said on Wednesday he opposed currency intervention as long as market moves were moderate.
The dollar index, which measures the dollar's value against a basket of six major currencies, edged up 0.3 percent to 76.407, having bounced off Thursday's one-year low of 76.010.
For now, the dollar is edging higher on short-covering, said Hoshino at Bank of Tokyo-Mitsubishi UFJ.
"There is some position adjustment taking place, with Asian players facing a long weekend," Hoshino added.
Sterling fell 0.4 percent to $1.6383 and hit a four-month low against the euro after a source familiar with the matter said British regulators set tougher than expected terms on Lloyds' mooted exit from a government scheme to insure it against credit losses, hindering its departure from the programme.
DOLLAR WEAKNESS INTACT
Market players said the dollar's respite could prove short-lived.
"We are seeing a bit of a pullback but the broader U.S. dollar weakness remains intact as it turns to be the currency for carry trades," said Jonathan Cavenagh, currency strategist at Westpac.
"Technically, the euro still looks very upbeat with strong support seen around $1.47. Also for the dollar index, while there is support around the 75.65 level, if that gives way, we could see it fall all the way down to 71."
The dollar index has shed over 2 percent this month on mounting speculation the greenback is fast becoming the preferred funding currency for carry trades.
Currency traders in Tokyo said the dollar could fall below 90 yen during Japan's three-day holiday period starting next Monday.
The dollar has been supported against the yen in the past few days due to some scattered dollar buying by Japanese investors and importers, said Bank of Tokyo-Mitsubishi UFJ's Hoshino. The absence of such flows during the holiday period could leave the dollar vulnerable against the yen, Hoshino said.
The Australian dollar fell 0.3 percent to $0.8694, down from a 13-month high of $0.8776 hit on Thursday.
The Aussie has risen over 2 percent in the past two weeks, helped by expectations of rising local interest rates and improved investor confidence, and a pullback was overdue, analysts said. Strong support is expected to emerge at around $0.8680.
The New Zealand dollar dipped 0.1 percent to $0.7100, having come off a 13-month high of $0.7159 hit on Thursday. (Additional reporting by Anirban Nag in Sydney and Satomi Noguchi in Tokyo; Editing by Joseph Radford)