* U.S. Q1 GDP growth accelerated but missed expectations
* Dollar sags vs yen; sterling hits 2-month high
* Focus on Fed and ECB policy meetings, U.S. data
By Masayuki Kitano
TOKYO, 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 0.4 percent versus the yen to 97.60 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 greenback retreated after data on Friday showed U.S. gross domestic product expanded at a 2.5 percent annual rate in the first quarter, 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.
"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.
Sterling rose to as high as $1.5526, 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 $1.5513, up 0.2 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 that starts on Tuesday, is widely expected to keep purchasing bonds at a pace of $85 billion a month.
Although the dollar has faced stiff resistance at 100 yen in recent weeks, many market players expect the greenback to head higher versus the yen over the medium term due to the BOJ's aggressive monetary easing.
Besides the Fed's policy meeting, U.S. economic data will be a focal point this week, especially the closely watched jobs report on Friday.
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 $1.3047.
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 Italian centre-left politician Enrico Letta named a coalition government on Saturday, ending two months of damaging political stalemate.
Letta is expected to set out his government's plans in parliament on Monday and will then need to win a vote of confidence in both houses to be fully empowered.