SINGAPORE, Sept. 23 (MNI) - The U.S. dollar held a slightly weaker tone through the Asian session Wednesday, although mild weakness in some regional stock markets cushioned the dollar's downside and kept it off its session lows through the afternoon.

Market attention is now on the Federal Open Market Committee meeting in the U.S., which takes place just ahead of a G20 meeting in Pittsburgh late this week.

In China, the Shanghai Composite Index ended the session down 1.89% at 2,842.72. Japan's stock market remained closed after ending down 0.7% last Friday.

Dealers said early U.S. dollar weakness came after the New Zealand currency jumped to a fresh high for the year at $0.7313, following the release of better-than-expected second quarter GDP data.

Real GDP posted a better-than-expected 0.1% quarter-over-quarter gain in the March to June quarter, after five consecutive quarters of decline, the government statistics office reported.

The Q2 result was better than the market consensus forecast for a contraction of 0.3% for the quarter.

"The New Zealand dollar again led the charge after a surprise increase in Q2 GDP officially ended the recession and brought rate hikes a bit closer," commented analysts at LGT Bank.

The U.S. currency fell to a Y90.48 low against the yen as the Kiwi rose, while euro-dollar also spiked to a $$1,4843 high, also marking its fresh high for the year so far after buy stops were triggered above previous high at $1.4821.

Euro-dollar then backed off as the market hits calmer waters after initial spurt of activity, ending the day around $1.4800, after a $1.4784 to $1.4843 range.

Market News International's tech analysts note there's not much resistance facing the pair until $1.4851/62, where the latter is the Sept 2008 high. Also noted is the daily Bollinger band top at $1.4906 although this is a rising target and likely to climb as price action gains.

Dollar-yen saw a relatively quiet session with Tokyo markets still closed for holidays, although the pair recovered from its early Sydney low to around Y90.83 and then spent the rest of the morning in mid-range between Y90.70 and Y91.05.

By the end of the day, the pair was at Y90.85, still stuck within the intraday Y90.48 to Y91.19 range.

As for the commodity currencies, Kiwi's jump to a new high today had dealers talking about a potential break above $0.7400 likely to spur further rallies. Tech charts meanwhile showed next resistance above that at $0.7431, marking a 76.4% retracement of the broad downmove from $0.8212 in March 2008.

"Initial resistance was felt at $0.7240 but (that) soon gave way when the sell-U.S. dollar theme came into picture," noted one trader.

Ahead tonight, the Fed is due to announce any monetary policy change around 2:15 p.m. EDT Wednesday, with interest rates expected to remain unchanged.

There is great interest in the accompanying statement and whether the Fed might look to tweak a few sentences in order to open the "tightening" door a crack to prepare the market for a return to normal rates.

"(Fed Chairman) Bernanke's announcement last week that 'recession is very likely over' does not mean rates are going up just yet," commented DBS Bank analysts. "The Fed usually waits until the unemployment rate has fallen for a year before it starts to tighten the reins."

The close proximity of the G-20 meeting gives the Fed yet another reason not to have the accompanying statement be interpreted as hawkish.

"While currencies are expected to be on the agenda, U.S. creditor nations may choose to express reservations over current U.S. fiscal and monetary policy in private, or during the bilateral meetings as it is unclear whether the dollar will be a high priority topic," commented analysts at UBS.

"Also of importance to the dollar is the FOMC meeting ahead of the G20. We think the Fed is unlikely to communicate any near-term reversal of its exceptionally accommodative monetary policy."

iahmad@marketnews.com ** Market News International Singapore Newsroom: 65-6559 6144 **