* Dollar sags under weight of global imbalances pre-G20
* Fed outlook also weighs on dollar, euro at 1-yr high
* Market sentiment firmly to sell dollars on any rally
(Updates prices, adds quotes, changes byline, dateline, previous LONDON)
By Steven C. Johnson
NEW YORK, Sept 22 (Reuters) - The euro hit a one-year high above $1.48 on Tuesday as deteriorating sentiment toward the U.S. currency pushed dealers to sell it ahead of a Federal Reserve meeting and Group of 20 summit this week.
Investors resumed their heavy dollar selling, after Monday's rare day of gains, on expectations the Fed will signal plans to keep its ultra-loose monetary policy well into 2010.
The market also expects G20 leaders this week to discuss rebalancing the global economy, a process which will almost certainly require a weaker dollar.
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. [ID:nLL725947]
"In a market where there's a dearth of events and data ahead of the Fed in particular, and with stock futures maintaining gains, it's a case of perpetuating dollar selling," said Jeremy Stretch, strategist at Rabobank in London.
Steven Butler, head of FX trading at Scotia Capital in Toronto, added, "I don't think anyone thinks a massive run on the dollar is a good thing, but as long as the moves are orderly, people are happy to see (a weaker dollar) play out."
The euro was last up 0.7 percent at $1.4780
"Every time we get to a round number in euro-dollar, we'll probably try to chip away at things on the way to $1.50, but for now $1.4825 is the next line in the sand, and then we'll have to wait and see about $1.49," said Butler.
Sterling was up 0.7 percent at $1.6325
The New Zealand dollar surged more than 2 percent against
the greenback to a 13-month high
DOLLAR IN FOCUS AT G20?
European Central Bank Governing Council member Axel Weber on Tuesday said recent moves in currency markets were "not out of line" given the euro zone's economic performance relative to other areas. [ID:nLM205927]
Some said this suggested the ECB was comfortable with the euro where it is 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 in Pittsburgh this week.
"Overall the trend for the dollar is still down," said Marcus Hettinger, global FX strategist at Credit Suisse in Zurich, predicting the euro at $1.50 by the end of the year.
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.