* Dollar edges up vs euro ahead of US rate decision
* Stg hits 7-wk low vs euro; UK jobs data, BoE mins awaited
* BOJ holds rates steady, to increase buying of JGBs
(Updates prices, changes byline, dateline; previous TOKYO)
By Jessica Mortimer
LONDON, March 18 (Reuters) - The dollar edged up against the euro on Wednesday in cautious trade ahead of a U.S. interest rate decision, while sterling hit a 7-week low against the euro ahead of key UK jobs data and Bank of England minutes.
The Federal Open Market Committee is expected to leave interest rates on hold at zero to 0.25 percent, with focus centred on whether it will announce any additional measures to expand its credit easing policies.
In particular, investors will be looking for any hints on whether it is moving towards -- or away from -- buying long-term U.S. government debt, though most analysts believe they will concentrate on the existing measures they have in place.
"Overall, markets are quiet ahead of the FOMC decision," Commerzbank currency strategist Antje Praefcke said.
She noted that expectations that the Fed will announce a move towards buying U.S. government debt have gained traction after the Bank of Japan announced plans to increase buying of Japanese government bonds, but she believed "they may be disappointed".
At 0857 GMT, the euro dipped 0.1 percent against the dollar to $1.3002 <EUR=>.
"There is a slight improvement in sentiment which means the risks are skewed to the upside for euro/dollar, especially after it broke through $1.30," Praefcke said.
Among major currencies, sterling was the biggest mover of the day, coming under selling pressure ahead of data at 0930 GMT which are expected to show a further rise in UK unemployment and the minutes to the BoE meeting earlier this month.
Investors will be scrutinising the minutes for further details on the programme to implement unconventional measures to boost the UK's money supply.
The euro rose 0.8 percent to 93.30 pence <EURGBP=>, just shy of an earlier seven-week high of 93.44 pence, while sterling also fell 0.9 percent against the dollar to $1.3924 <GBP=>.
The yen steadied but remained weak, with the euro staying close to an earlier 11-week high of 128.83 yen hit on the EBS trading platform.
"The yen is seeing a dull, slow move downwards," Commerzbank's Praefcke said.
Selling was limited, however, with repatriation by Japanese investors ahead of the fiscal year-end at the end of this month preventing the currency from falling too much, she noted.
The dollar rose 0.1 percent against the yen to 98.72 yen <JPY=>, while the euro was steady at 128.23 yen <EURJPY=R>.
The Bank of Japan said overnight it was holding interest rates steady at 0.10 percent and increasing its outright buying of Japanese government bonds to 1.8 trillion yen ($18.28 billion) per month from 1.4 trillion yen [ID:nT369733].
The yen showed little reaction to the news, as other central banks, notably in the UK and Switzerland, have already announced aggressive monetary easing measures.
"I don't think it is the case that the yen's fall will accelerate because of this (the BoJ buying more Japanese government bonds)," said Osamu Takashima, chief analyst at Bank of Tokyo-Mitsubishi UFJ in Tokyo.
Speaking after the decision, BoJ governor Masaaki Shirakawa said the central bank had limited room left to raise its buying of government bonds [ID:nTKF104300].
Meanwhile, analysts say investors are beginning to feel a little more confident that financial market conditions may be starting to stabilise, helped by news of a 22.2 percent surge in U.S. housing starts in February and an improvement in German investor sentiment. [ID:nN17421065] (Reporting by Jessica Mortimer; additional reporting by Masayuki Kitano in Tokyo; editing by Andy Bruce)