* U.S. Q1 GDP growth accelerated but missed expectations
* Dollar sags vs yen in holiday-thinned trade
* Sterling hits 2-month high
* Focus on Fed, ECB meetings this week and U.S. data
By Masayuki Kitano
SINGAPORE, April 29 (Reuters) - The dollar fell broadly and sterling hit a two-month high on Monday, as traders continued to reduce their exposure to the greenback after data last week showed the U.S. economy grew at a slower-than-expected pace in the first quarter.
The dollar declined against a swathe of currencies and dropped 0.3 percent versus the yen to 97.73 yen, edging away from a four-year high of 99.95 yen set earlier in April after the Bank of Japan unleashed its drastic monetary stimulus.
The dollar’s fall versus the yen came in holiday-thinned trade, with Tokyo financial markets closed on Monday for a Japanese public holiday.
“It looks like dollar longs are getting flushed out,” said Satoshi Okagawa, senior global markets analyst for Sumitomo Mitsui Banking Corporation in Singapore.
“The poor GDP reading was big. Cable, Aussie, kiwi, Canadian dollar, the Singapore dollar...they are all moving,” he said, referring to the broad drop in the U.S. dollar on Monday.
U.S. gross domestic product expanded at a 2.5 percent annual rate in the first quarter, data showed on Friday, falling short of market expectations for 3.0 percent growth.
The GDP data came on the heels of a series of weak U.S. indicators over the past few weeks, including retail sales and durable goods orders, that have stirred concerns about the U.S. economy’s outlook.
Sterling rose to $1.5527, its highest level since mid-February.
The pound, which has stayed firm after better-than-expected UK first-quarter growth data last Thursday tempered expectations that the Bank of England will add to its asset-buying programme, last fetched $1.5519, up 0.3 percent for the day.
The U.S. GDP report provides ammunition for the Federal Reserve to maintain its monetary stimulus. The U.S. central bank, which holds a two-day policy meeting starting on Tuesday, is widely expected to keep purchasing bonds at a pace of $85 billion a month.
Still, many market players expect the greenback to head higher versus the yen over the medium term, with the Japanese currency seen pressured by the BOJ’s pledge to inject $1.4 trillion into the economy in less than two years.
“We’re still bullish dollar/yen. The BOJ story still has a long way to run,” said Gareth Berry, a Singapore-based G10 FX strategist for UBS.
In the near-term, the dollar will probably find support near previous resistance at its March high of 96.71 yen, said Roy Teo, FX strategist for ABN AMRO Bank in Singapore.
The euro edged up 0.1 percent to $1.3046.
Growing expectations that the European Central Bank may cut interest rates at its policy meeting on May 2 to support the euro zone’s recession-hit economy have kept a lid on the euro, which has retreated since hitting a seven-week high of $1.3202 on April 16.
Gains in the euro on Monday were subdued, even after a new Italian government under Prime Minister Enrico Letta was sworn in on Sunday.
Letta, who ended two months of political stalemate on Saturday when he brought together former political rivals in a broad coalition government, will seek the backing of parliament in a confidence vote on Monday.
Besides the policy meetings by the Fed and ECB, U.S. economic data will be a focal point this week, especially the closely watched jobs report on Friday.