Australia shares slip to 11-week low, investors eye Fed

* ASX 200 hovers at 11-week low on jitters over Fed hike

* 75 shares higher, 105 shares lower, 20 shares unchanged

* High yield stocks including 'Big Four' banks, Telstra drop (Adds analysis, quotes, stocks on the move)

By Thuy Ong and Gyles Beckford

SYDNEY/WELLINGTON, Sept 17 (Reuters) - Australian shares eased to an 11-week low on Wednesday on worry the U.S. Federal Reserve may begin to raise rates although an extended recovery in miners tempered losses.

High-yielding stocks, including the 'Big Four' banks, fell as investors trimmed equity holdings.

The country's top lender by assets, National Australia Bank m declined 0.8 percent and Australia's No.3 lender, Australia and New Zealand Banking Group, dropped 1.4 percent. Australia's biggest telecommunications provider Telstra Corp Ltd slipped 0.2 percent.

Martin Lakos, a division director at Macquarie Bank, said he suspects overseas investors were selling down, with markets concerned about the outcome of the Federal Open Market Committee meeting and when the Fed will shift its policy.

"You're seeing that weakness flow into Australian banks because typically, as bond yields rise, you tend to see a shift towards growth and away from defensives and high-yielding securities," Lakos said, adding that he thought market jitters were premature. Macquarie Bank is forecasting a hike in U.S. interest rates in the first or second quarter of 2015.

The S&P/ASX 200 index lost 21.3 points to 5,424.1 by 0210 GMT, its sixth session of losses and its longest losing streak since early August. The benchmark fell 0.5 percent.

The benchmark hit a six-year high of 5,679.5 on Aug. 21, but has since slumped intraday to lows last seen on July 2 on a rout in iron ore prices and fears over a slowdown in China, Australia's largest export market. A rise in bond yields has also dampened investor appetite for equities.

Miners continued their rebound as iron ore futures extended gains, backed by expectations Chinese steel mills would replenish stockpiles ahead of a long holiday next month.

Global iron ore miners BHP Billiton Ltd and Rio Tinto Ltd both added 0.6 percent. Iluka Resources Ltd (Other OTC: ILKAF - news) rose 0.2 percent, while Oz Minerals Ltd jumped 1.2 percent.

Sai Global Ltd slumped 7.7 percent to trade at April lows of A$4.09 after the compliance advisory firm said it had not received any bids for the whole company after putting itself up for sale.

Poseidon Nickel Ltd soared 4.4 percent after coming to an agreement with the Minderoo Foundation to extend the terms of its loan facility, with a repayment date until April 1, 2015.

New Zealand stocks were slightly softer after giving back early solid gains, with the benchmark NZX-50 index down 0.1 percent at 5,185.35. It had risen as much as 0.4 percent after the open.

Among the top stocks, accounting software developer Xero continued its recovery, rising 2.9 percent to NZ$21.60, but telecommunications company Spark was down 2 percent at NZ$2.99.

Fast food operator Restaurant Brands hit a record high of NZ$3.43 after reporting a 5.8 percent lift in second quarter sales, before easing back to settle up 1.5 percent at NZ$3.40.

The market also reflected several large dividend payouts, including casino operator Sky City Entertainment (NZSE: SKC.NZ - news) , Port of Tauranga, and retailer Briscoe Group. (Editing by Jacqueline Wong)