* Dlr index near 1-mth low, clings to 200-day moving average
* Yen eyes Japanese ruling party leadership vote
* Pound drops on surprise weakness in British house prices
* Kiwi down on weak NZ retail sales data
By Hideyuki Sano
TOKYO, Sept 14 (Reuters) - The dollar was on the defensive near a 15-year low against the yen on Tuesday as traders look to a Japanese ruling party leadership vote in which the prime minister faces a challenge from a proponent of more aggressive stimulus.
The dollar is also near a one-month low against a basket of currencies after suffering its steepest fall against the euro in two months the previous day on rising investors risk appetite.
Japanese media surveys have shown the race between Prime Minister Naoto Kan and party heavyweight Ichiro Ozawa is too close to call ahead of a party conference due to start at 0500 GMT.
"Unless Ozawa wins the market will not react much as it just means the status quo. If Kan wins the market will try to sell the dollar, betting that Japan cannot intervene and sell the yen at this stage," said Daisuke Karakama, a market economist at Mizuno Corporate Bank.
As challenger Ozawa has said he would consider currency intervention, some market players would see an Ozawa victory as positive for the dollar, at least in the near term.
But others see it differently.
Junya Tanase, a currency strategist at J.P. Morgan Chase Bank, said the dollar could fall as Ozawa's reflationist policy platform could boost Japanese bond yields, shrinking the yield gap between Japan and the United States.
"We think there is little difference between the two candidates in their stance on intervention. But an Ozawa victory could boost Japanese bond yields as the bond market seems to be sensitive about fiscal deterioration," Tanase said,
Japanese bond yields started to spike on Aug. 26, the day Ozawa announced his bid for the party leadership, Tanase said.
The dollar stood at 83.65 yen, near its 15-year low against the yen of 83.34 yen hit last week.
The dollar/yen rate has closely tracked yield gaps between the two, partly because a lower gap means less incentive for Japanese investors to buy U.S. debt instruments.
Falls in U.S. bond yields on Monday despite strength in global shares put pressure on the dollar/yen rate.
The euro traded at $1.2870, down slightly on the day but keeping much of Monday's 1.6 percent gains following solid data from China and relief over new Basel III banking rules.
It faces a major resistance point around around $1.2920-30, a level that has blocked the currency a few times since August.
The dollar index is languishing at 81.92, little changed on the day but near a one-month low of 81.760 hit on Monday and its 200-day moving average of 81.761.
Although the index recovered from a brief foray below the 200-day moving average last month, a break below that could stoke pessimism over the U.S. currency.
The British pound fell 0.3 percent to $1.5383 after surprisingly weak house price data.
The New Zealand dollar dropped about 0.6 percent to $0.7295 after weaker-than-expected New Zealand retail sales. (Editing by Michael Watson)