* Euro, sterling steady vs dlr ahead of ECB, BoE decisions
* UK focus on whether BoE will expand QE
* Yen falls as European shares rise; sentiment stays buoyant
* Little impact seen from ECB decision
(Updates prices, adds quotes)
By Jessica Mortimer
LONDON, Aug 6 (Reuters) - The dollar was steady against the euro and sterling on Thursday as the market awaited key policy decisions by the European Central Bank and the Bank of England, while higher equities weighed on the yen.
Both the ECB and the BoE are seen leaving interest rates on hold at 1.0 and 0.5 percent respectively, though the market will be looking for whether the central banks have adopted a more optimistic tone on the economic outlook..
The BoE decision is expected to attract the most interest, with focus on whether the BoE will raise asset purchases under its quantitative easing programme. This is seen as less likely after this week's batch of stronger-than-forecast UK data.
The BoE will announce its rate decision at 1100 GMT, while the ECB's decision is due at 1145 GMT, followed at 1230 GMT by ECB President Jean-Claude Trichet's news conference.
Analysts said caution ahead of the rate decisions, as well as key U.S. employment data on Friday, prevented the euro and sterling from rising beyond their recent multi-month highs against the dollar.
"In a decent equity market environment you would expect the dollar to fall, but with all the events and data we have coming out people are staying away from selling the dollar any further for the time being," ING currency strategist Tom Levinson said.
"The ECB decision is likely to be a non-event, but there is a lot of uncertainty surrounding the BoE decision," he added.
The general mood on financial markets remained one of optimism, however. European shares rose 0.8 percent, buoyed by more positive results in the financial sector, including from Commerzbank and KBC.
This weighed on the yen, which typically falls in times of greater investor appetite for risk.
Another negative for the Japanese currency was a story citing sources saying the Bank of Japan will probably forecast three years of deflation extending to March 2012, which may delay Japan's exit from low interest rates.
By 0949 GMT, the euro was little changed against the dollar at $1.4400, while sterling was also steady at $1.6990.
Both currencies were close to multi-month highs, however. On Wednesday the euro hit $1.4448 on trading platform EBS, its highest since mid-December, while sterling rose to its strongest in more than nine months at $1.7044.
Against the yen the dollar rose 0.4 percent at 95.33 yen and the euro was up 0.3 percent at 137.25 yen.
RATE DECISIONS EYED
Market players were leaning towards forecasting the Bank of England will not expanding its quantitative easing programme beyond the current 125 billion pounds, but the decision is still seen as a close call.
Analysts said if the BoE signalled a pause or end to quantitative easing, sterling could rise to around $1.7050/60 but further gains may be capped given its steep rise this week. Traders also said the upside could also be limited as options with a strike price were seen around $1.7050.
The ECB decision is not expected to have much impact on markets. The ECB is expected to stick to a similar assessment to the July policy meeting, when it said it expected economic activity to stay weak for the rest of the year, though the pace of decline was likely to ease.
"Only a clear statement in favour of or against further 'unconventional' measures would be able to provide new impetus for euro/dollar, but that seems hardly likely," Commerzbank analysts say in a note.
However, interest rate futures suggest markets are starting to price in higher euro zone rates further down the line, with March 2010 euribor futures up around 22 basis points this week in terms of implied yield.
Elsewhere, the Australian dollar rose 0.2 percent to $0.8418 , lifted by better-than-expected Australian employment data, while a higher-than-expected jobless rate in New Zealand pushed the New Zealand dollar down 0.4 percent at $0.6706.
(Additional reporting by Tamawa Desai in London; Editing by Andy Bruce)