FOREX-Dollar takes Fed minutes in its stride, China data next up

* Dollar index holds near two-week peak, euro dips below $1.1100

* Fed minutes confirm June rate hike very unlikely

* Flash PMIs for China and Japan in focus

By Ian Chua

SYDNEY, May 21 (Reuters) - The dollar traded near a two-week peak against a basket of major currencies early on Thursday, having held on to most of its gains after closely watched minutes from the Federal Reserve's April meeting contained no major surprises.

The dollar was particularly bid against the euro, which sank heavily on Tuesday after it was revealed the European Central Bank may accelerate its bond-buying stimulus programme.

The euro last traded at $1.1094, having fallen as far as $1.1062 - a low seen late in April. Against the yen, the greenback scaled a two-month peak of 121.49, before taking a step back to 121.24 in early Asian trade.

The dollar index stood at 95.588, just below its overnight high of 95.837.

Minutes of the Fed's April meeting showed policymakers believed it would be premature to hike interest rates in June, a view that is already widely held in the market following a dismal start to the year.

"Although they contained no outright surprises, the April FOMC minutes showed a few signs of participants growing more concerned about downside risks to the economic outlook, with little mention of offsetting upside risks," analysts at JPMorgan (LSE: JPIU.L - news) wrote in a note to clients.

"At this point, we also consider every meeting going forward to be "live", although the last several months' deterioration in the growth data leave June or July looking increasingly unlikely. We still look for lift-off in September."

Minutes of the Bank of England's May meeting showed all nine members voted to keep rates at a record low 0.5 percent, but two felt the decision was finely balanced between voting to keep rates on hold or to raise them.

That was enough to spark a turnaround in sterling, which had been sold off earlier in the week after Britain's annual rate of consumer price inflation fell below zero for the first time in more than half a century.

The pound last traded at $1.5534, having rebounded from a one-week low of $1.5447. It also advanced on the euro, which fell as far as 71.25 pence - its lowest in a week.

With the dollar in favour, commodity currencies came under some pressure. That saw the Australian dollar dip back below 79 U.S. cents, extending its pullback from $0.8164 set last Thursday.

The focus in Asia will be on surveys of manufacturing activity in China and Japan.

Any disappointment will no doubt fuel talk of more stimulus from Beijing and will come at a time when concerns are growing that Japan's radical stimulus programme may not be working as expected. (Editing by Richard Pullin)