* Dollar index hits 8-mth low, EUR/USD hits 6-mth high
* Broad dollar selling pressure seen before US ISM data
* Speculation of more Fed QE batters U.S. currency
By Naomi Tajitsu
LONDON, Oct 1 (Reuters) - The dollar sank to an eight-month low against a currency basket on Friday as investors took speculation U.S. manufacturing due later in the day would be weak as a chance to sell the greenback.
The dollar hit its weakest against the euro since March on the view that it will face more losses if the Federal Reserve eases monetary policy further to support the economy.
Upbeat Chinese manufacturing data, which helped boost demand for riskier assets and pushed the Australian dollar near its highest level versus the U.S. currency in more than two years, added to dollar-selling pressure.
The dollar slipped against the yen, hovering near a 15-year low hit last month which prompted Japan to sell the yen. Investors remained wary of more intervention.
"The market is nervous about the ISM because investors know that it could be worse than expectations," said Lutz Karpowitz, currency analyst at Commerzbank in Frankfurt.
"More QE could be in store if U.S. data in the coming weeks don't surprise on the upside."
Expectations are for the Institute of Supply Management's U.S. manufacturing PMI to slide to 54.5 for September from 56.3 the previous month. The data is due at 1400 GMT.
A weak reading would contrast with a rise in China's official purchasing managers' index announced earlier on Friday, which provided further evidence that an important engine of global growth is humming.
By 0953 GMT, the euro was up 0.8 percent at $1.3763 according to Reuters data, its highest since mid-March and breaking through resistance around $1.3692, a peak hit in April.
Traders cited demand from Asia, including official names, pushing the euro higher to $1.3700, as the single currency has been a major beneficiary of the dollar's sell-off.
Losses against the euro helped push the dollar down 0.6 percent against a currency basket, driving the dollar index to 78.147, its lowest since January. The index fell more than 5 percent in September, its worst monthly performance since May 2009.
DUMPING THE DOLLAR
Market participants said speculator flows took the euro even higher, close to where options expiries at $1.3750 were expected later in the day.
The euro has rallied 15 percent against the dollar from a four-year low hit in June. Some analysts said the euro's rally in past weeks, despite problems facing the Irish economy and banking sector, was a sign of strong demand to sell dollars.
The euro is poised to close above its 55- and 100-week moving averages at $1.3612 and $1.3572 respectively and technical analysts said this would open the way to more gains.
"The euro will reap the benefits despite its local deficiencies, and some of the momentum plays, including the AUD and some emerging market currencies, look like they have further to run," Credit Agricole analysts said in a note.
The Chinese PMI boosted the Australian dollar, which rose 0.6 percent to $0.9734, matching its highest in roughly two years hit the previous day.
The dollar slipped 0.3 percent to 83.20 yen, edging closer a 15-year low of 82.87 yen hit last month. Traders and analysts say a fall below that level may be one potential trigger point for more intervention.
Japanese Finance Minister Yoshihiko Noda said on Friday he would continue to take decisive steps on currency moves when necessary.