May 25, 2017 / 12:24 AM / 3 months ago

FOREX-Dollar on back foot after Fed minutes, euro resumes advance

* Minutes from latest Fed meeting not as hawkish as expected

* Euro edges back towards 6-1/2-mth high

* BOC's upbeat economic view boosts Canadian dollar

By Shinichi Saoshiro

TOKYO, May 25 (Reuters) - The dollar was on the defensive early on Thursday after minutes of the latest Federal Reserve policy meeting were not as hawkish as anticipated, while the euro edged back up towards a 6-1/2-month high.

Fed policymakers agreed they should hold off on raising interest rates until they see evidence that a recent economic slowdown was transitory, the minutes from their last policy meeting showed on Wednesday.

The minutes were seen to indicate heightened Fed caution towards interest rate hikes and took the wind out an earlier bounce by the dollar, which had been plagued recently by U.S. political concerns centred on President Donald Trump.

The dollar was little changed at 111.570 yen, pushed away from a one-week high of 112.130 scaled the previous day.

The euro, which went as low as $1.1168 overnight, was 0.1 percent higher at $1.1230, making its way back towards the 6-1/2-month peak of $1.1268 touched on Tuesday.

The common currency has enjoyed a bull run this month on factors including an ebb in French political concerns and upbeat euro zone data.

"The euro is resuming its advance with the dollar sagging on the Fed's minutes. It has the momentum to surpass the $1.1300 mark and we could see the rise continue towards $1.1500," said Daisuke Karakama, market economist at Mizuho Bank.

"That said, the market is low on incentives after the Fed minutes' release. We have to wait until the U.S. non-farm payrolls report for the next big event, with dealers keeping an eye on any irregular Trump-related news headlines in the meantime."

The dollar index against a basket of major currencies . was down 0.3 percent at 96.983.

The Canadian dollar stood near a one-month high against the greenback after the Bank of Canada was more upbeat about the economy than some investors expected.

The central bank held interest rates steady on Wednesday as expected, but noted strong spending by Canadians along with a housing boom and job growth.

The Canadian dollar was at C$1.3413 per dollar after touching C$1.3405 overnight, its strongest since April 19. Stronger crude oil prices have also supported the loonie this week.

The Australian dollar was little changed at $0.7500 . The Aussie fell to $0.7443 on Wednesday after rating agency Moody's downgraded China, but it managed to bounce back as the dollar sagged broadly.

The Australian dollar is often used as a liquid proxy for China-related trades. (Reporting by Shinichi Saoshiro; Editing by Eric Meijer)

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