* Dollar/yen climbs to near two-week high
* Dollar rises broadly, traders trim bearish bets
* Investors await Fed policy meeting, G20 summit
* Sterling falls after BoE report on exchange rates (Recasts; updates prices, changes bylines)
By Nick Olivari
NEW YORK, Sept 21 (Reuters) - The U.S. dollar climbed broadly on Monday, hitting a near two-week high against the yen as investors reduced bets against the greenback ahead of a monetary policy meeting by the Federal Reserve this week.
The dollar rose more than 1 percent against the yen after speculative flows pushed it higher, though the gains were subsequently pared. Trading in Asia was quiet as financial markets in several major markets were closed for local holidays.
In the absence of key events or major economic data, traders took profits on currencies that have rallied against the dollar, including the euro, which has risen more than 2 percent so far this month.
"There are some thoughts in the markets that the (Federal Open Market Committee) might announce that they're going to start removing stimulus," said Chuck Butler, president of Everbank World Markets in St. Louis. "That's why the dollar is a little bit stronger.
"I don't think this is any trend reversal of what we've seen from March on. This could just really be a correction. Last week's run-up (in other currencies) was huge," he added.
The FOMC is widely expected to hold interest rates unchanged between zero and 0.25 percent at the conclusion of its two-day meeting on Wednesday, but traders will watch for any clues about the U.S. central bank's exit strategy from the current quantitative easing.
A withdrawal of stimulus would likely reduce the flow of dollars into the economy. The currency has been on a downward trend since the Fed launched its policy of buying Treasuries in March.
In late afternoon trading in New York, the ICE Futures dollar index, which tracks the greenback against a basket of six currencies, rose 0.5 percent to 76.776, after climbing to 77.108, its highest level since Sept. 10.
The euro slipped 0.2 percent to $1.4672, easing from $1.4766 hit late last week, which was its strongest since September 2008, according to Reuters data.
Against the yen, the dollar was up 0.8 percent at 92.04 yen, near a peak of about 92.53 yen, its highest since Sept. 9, according to Reuters charts.
Traders said there were sell orders from Japanese exporters above 92.50 yen, capping any dollar/yen rally until Tokyo markets reopen on Thursday.
POUND FALLS, G20 AWAITED
Analysts said some investors were concerned that short dollar positions have become overstretched, suggesting a near-term correction may be in store.
Net short-dollar positions -- bets that the U.S. currency will fall -- rose last week to their highest since March 2008, according to the Commodity Futures Trading Commission data and Morgan Stanley.
"We have also seen from the speculative positioning an increase in dollar shorts, in particular euro longs," said Vassili Serebriakov, currency strategist at Wells Fargo in New York. "So it's not surprising to see that outstanding short exposure is being scaled back."
The pound hit a five-month low against the euro at 90.78 pence after the Bank of England said the pound's long-run sustainable exchange rate may have fallen due to an increased focus on Britain's economic imbalances.
The dollar also benefited from waning risk appetite illustrated by a fall in the pan-European FTSEurofirst 300 index below the 1,000 level. U.S. stocks also traded mostly lower.
Investors awaited a summit of leaders from the Group of 20 industrialized and emerging economies in Pittsburgh later in the week. Executive pay and the need to examine strategies for withdrawing state stimulus from the global economy have dominated debate ahead of the meeting.
Boris Schlossberg, director of currency research at GFT Forex in New York, said rhetoric ahead of the event sparked some profit-taking in risky assets and news of further government regulation of capital markets could fuel risk aversion.