(Corrects U.S. dollar index values in paragraph 8)
By Tom Westbrook
SINGAPORE, Sept 23 (Reuters) - The dollar eased slightly from a one-month high on Thursday, after the Federal Reserve set the stage for rate hikes next year but left enough breathing room to slow things down if necessary, while sterling traded firmly ahead of a Bank of England meeting.
In an Asia session thinned by a holiday in Japan, the euro bounced a bit to $1.1705, scraping off a one-month low. Sterling was up 0.1% to $1.3643 as investors weighed the risk of a hawkish surprise from the central bank.
Other moves were pretty modest, with the greenback staying near multi-week highs against the Australian and New Zealand dollars and holding onto gains made against the yen in the wake of the Fed meeting. It bought 109.80 yen.
The Fed left policy settings unchanged on Wednesday and, as expected, did not announce the beginning of asset purchase tapering. But chair Jerome Powell flagged that it was not far off, perhaps as near as November, and said board members thought tapering could conclude around mid-2022 - opening the way for rate hikes after that.
As well as helping the dollar, the U.S. yield curve flattened and Fed funds futures markets moved to price a 50% chance of a hike in October and to fully price a 25 basis point rate hike in December after his comments.
"Powell didn't give any specifics about the start of the taper, he said there was broad agreement in the end of taper, one which 'concludes around the middle of next year,'" said John Briggs, strategist at NatWest Markets.
"This is in our view more important than when the taper starts, as it starts the clock on when the next hike may occur."
As the dollar retreated slightly in Asia, its index slipped from a one-month high of 93.526 to 93.369 as traders took profit and figured there were a few caveats in Powell's remarks.
Powell said tapering would not carry a "direct signal" on the rates outlook, even though median projections from Fed members showed liftoff in 2022.
The Bank of England's monetary policy committee meets later on Thursday, with traders expecting it to keep rates steady but wary of more members joining Michael Saunders, an external member of the panel, by pressing for tapering due to inflationary pressures.
China Evergrande's struggles to avoid defaulting also kept investors on edge. China's second largest property developer settled with bondholders over a domestic coupon payment, but still has to settle $83.5 million in interest on an offshore bond due on Thursday.
The risk-sensitive Aussie was flat at $0.7243 by afternoon, and the kiwi was steady at $0.7006.
Norges Bank also meets on Thursday and is widely expected to deliver the first hike among G10 central banks. The Norwegian Crown was a touch firmer at 8.6486 per dollar.
(Reporting by Tom Westbrook; Editing by Ana Nicolaci da Costa & Simon Cameron-Moore)