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FOREX-Dollar climbs as yen, sterling sag; euro off lows for now

* Dollar index hovers near 14-month high

* Dollar/yen edges towards 6-year high

* Euro crawls off lows ahead of ECB policy review (Adds details, quotes)

By Shinichi Saoshiro and Ian Chua

TOKYO/SYDNEY, Sept 3 (Reuters) - The dollar hovered at 14-month highs against a basket of major currencies on Wednesday, underpinned by stronger-than-expected U.S. data and a resulting rise in Treasury yields.

The greenback received further support from a sell-off in the yen, which neared a six-year low against its U.S. counterpart, and in sterling, pummelled by opinion polls suggesting growing support for Scottish independence in a referendum later this month.

The dollar traded near an eight-month high of 105.28 yen . A rise above 105.45 yen would take the dollar to a high not seen since October 2008.

The sell-off in the yen coincided with renewed hopes about a highly anticipated portfolio change in Japan's behemoth Government Pension Investment Fund (GPIF), stirred by the forecast appointment of reform-minded Yasuhisa Shiozaki to head the ministry that oversees the fund.

Due to be announced in coming weeks, the GPIF asset allocation overhaul is expected to see the fund move into riskier assets including stocks and foreign bonds, which could increase demand for foreign currencies.

The reshuffle is due to be announced later on Wednesday but the likely names have been widely discussed in the media.

The spike in intra-day volatility that jerked dollar/yen out of a well-worn 101-103 range marks an end to the summer lull.

"Expectations were mounting for the dollar to move higher and participants were waiting for a trigger. It was a little surprising to see such a big reaction to Shiozaki's appointment. But for forex market players like us, the reason is not important as long as currencies move," said Bart Wakabayashi, head of currencies at State Street in Tokyo.

"Large moves in dollar/yen catch the attention of retail day traders, who appear to be showing a renewed interest in trading after the long lull. They tend to first enter the market with dollar-buying trades ... They are a force to be reckoned with," he said.

The dollar index moved within reach of the 14-month peak of 83.039 scaled overnight after data showed U.S. manufacturing activity hit a near-3-1/2-year high last month and construction spending rebounded strongly in July.

"This only reinforces our bullish U.S. dollar view premised on a relative pick-up in the U.S. economy, some more front-end rate support for the dollar ... as rates re-price to the Fed's own forecasts," analysts at JPMorgan wrote in a note to clients.

They added that low euro zone inflation and the risk of a more activist European Central Bank (ECB) further supported their upbeat dollar view.

The U.S. two-year Treasury yield jumped to a one-month high and the benchmark 10-year yield posted its biggest daily rise in a month after the data, in turn helping the greenback.

Sterling extended losses to mark a five-month low of $1.6465 after slumping 0.8 percent overnight on a poll that showed growing support for the "yes" vote in the referendum.

The euro, which briefly plumbed a one-year low of $1.3110 , staged a modest recovery to $1.3135, helped by a rally in euro/yen to a two-month high of 138.255.

But euro bulls are likely to tread cautiously ahead of an ECB meeting on Thursday, with the market split on whether the central bank will take more immediate stimulus steps to stave off deflation and the economic fallout from the Ukraine crisis.

French President Francois Hollande and ECB chief Mario Draghi agreed on Monday that low inflation and weak growth were threatening the European Union's economy, an official in the president's office said.

(Editing by Eric Meijer and Alan Raybould)