* Dollar index hits 3-yr low, euro hits 17-mth high
* Euro may head toward $1.50, Aussie $1.10
* But euro faces resistance at $1.49, more ahead of $1.50
By Jessica Mortimer
LONDON, April 28 (Reuters) - The dollar slid to a three-year low against a basket of currencies on Thursday, with the euro looking set to attack $1.50 after the Federal Reserve signalled U.S. interest rates would stay very low for a prolonged period.
The dollar dropped across the board, with the Australian dollar bulldozing through previous highs to a 29-year peak above $1.0900 and looking poised to break $1.10 while both the euro and sterling vaulted to 17-month highs.
The euro stalled ahead of $1.4900, however, and traders said it was likely to face stiff resistance on the approach to $1.50, citing heavy offers from $1.4880 up to $1.4900, as well as resistance from a reported options barrier at $1.4900.
Traders said Asian central bank diversification of dollar holdings into euros and other currencies was also a major factor in the dollar's falls.
Fed chairman Ben Bernanke spoke of a "relatively slow recovery" and a labour market in a "very, very deep hole" as the Fed trimmed its 2011 growth forecast and repeated it plans to keep rates very low "for an extended period".
"It's all one way across the board, everyone seems to be betting on a weaker dollar and it seems a pretty safe bet," said Niels Christensen, currency strategist at Nordea in Copenhagen.
"The market is taking on board the more dovish element of the statement and the fact there is no indication of an early rate hike."
He said it was "not a bold forecast" to expect the euro to hit $1.50 in the next week or two. Investors are looking at buying on any dips but those dips are "becoming few and far between".
The dollar index, which measures the dollar's value against a basket of currencies, slid to a three-year low of 72.871, and last stood at 73.062, down 0.6 percent on the day.
The dollar index has slid nearly 4 percent this month, bringing it closer to a record low of 70.698 hit in March 2008 and leaving it on track for the biggest monthly decline since Sept. 2010.
The euro hit a 17-month high of $1.4882 on trading platform EBS, gaining steam after triggering stop-loss bids around that level and after breaching resistance around $1.4850, the upper part of a uptrend channel that had been in place since mid-February.
It was last up 0.4 percent at $1.4840, with technical resistance seen at the Dec. 7 peak of $1.4905. Above $1.4900, traders reported more offers at $1.4930 up to $1.4950, where another options barrier was reported.
LOOSE U.S. POLICY
A Reuters poll on Wednesday showed most U.S. primary dealers expect the Fed to keep interest rates near zero until the end of 2011. By contrast the European Central Bank has already raised and the Bank of England are seen likely to raise interest rates later this year.
The Australian dollar scaled a fresh 29-year high near $1.0948 and was last up 0.6 percent at $1.0932.
Sterling also hit a 17-month peak of $1.6747, and last up 0.35 percent at $1.6684. Possible upside targets include the November 2009 high at $1.6879 and then the August 2009 peak of $1.7044.
"It's clear that the dollar selling has been given a green light and we have the Asian central banks intervening... So that suggests further upside for the euro and Aussie," said Rob Ryan, FX strategist at BNP Paribas in Singapore.
The dollar was down 0.7 percent at 81.66 yen, though traders reported bids around 81.50 yen, while the euro was down 0.2 percent at 121.21 yen.
The yen showed little reaction after the Bank of Japan kept monetary policy steady on Thursday, as widely expected.
In a surprise move, Deputy Governor Kiyohiko Nishimura proposed expanding the BOJ's pool of funds for asset buying and market operations to 45 trillion yen, but the proposal was rejected. (Additional reporting by Masayuki Kitano in Singapore; editing by Patrick Graham)