* Dollar rampage aided by growing global economic jitters
* Euro hits near 8-mth low, stg hits 2-1/2-yr trough vs dlr
* Aussie and kiwi tumble more than 1 pct
* BoC rate decision eyed
(changes dateline, byline, adds quotes, updates prices)
By Veronica Brown
LONDON, Sept 3 (Reuters) - The dollar continued its winning run on Wednesday, soaring to an 11-month high against a basket of major currencies as investors increasingly put faith in the U.S. unit amid a deteriorating global economic backdrop.
Depressed oil prices also added support to the greenback at the expense of high-yielding currencies with crude having tumbled way below $110 a barrel CLc1 after Hurricane Gustav left energy facilities in the Gulf of Mexico mostly unscathed.
The dollar's rally continued to batter an already deflated sterling to 12-year lows on a trade-weighted basis <=GBP>, while the euro hit its weakest in nearly eight months before policy decisions by both the European Central Bank and the Bank of England on Thursday. [ID:nL1358323] [ID:nL2593052]
The Australian and New Zealand dollars each fell more than 1 percent to one-year lows against the dollar. Selling of the Aussie picked up after data showing Australian economic growth slowed slightly more than expected in the second quarter.
Analysts said investors were increasingly getting on board with the dollar as a safer place to allocate cash compared with other currencies whose countries were further behind in terms of economic readjustment in the wake of the global credit crunch.
"We're seeing a continuation of the trend where sentiment on the rest of the world is deteriorating while sentiment in the U.S. is improving albeit from a very low base, and the dollar is outperforming as a result," RBC head of FX strategy Adam Cole said.
The dollar index .DXY, which tracks its performance against six major currencies, rose 0.7 percent an 11-month high of 78.614.
The dollar index has gained about 9 percent since mid-July, breaking long-term technical resistance levels that have convinced many analysts it is poised for a long-term recovery.
The euro fell 0.8 percent against the dollar to a near eight-month low of $1.4395
Data released earlier showed the euro zone's services sector shrank at a slightly lower than expected pace in August but stayed near a five-year low [nL2724349].
HIGH-YIELDERS ERODED
Traders said hedge funds were rushing to cover short positions on the dollar, leading to large-sized offers in the euro and sterling.
Investors have slashed holdings in currencies that had risen over the past few years, such as the Australian dollar and the euro, after getting caught off guard by bleak outlooks for their economies.
Some Asia-based traders said Japanese retail margin traders, who make leveraged bets with borrowed funds, were forced to shed the Aussie and the New Zealand dollar in an attempt to cut losses.
The Aussie fell 1.6 percent against the dollar to $0.8235
Australian economic growth slowed to 0.3 percent in the second quarter for a 2.7 percent annual pace, below forecasts and reinforcing expectations that the Reserve Bank of Australia will cut interest rates further. [ID:nSYD327190]
Today's central bank event will be the Bank of Canada's rate decision, widely expected to result in borrowing costs staying on hold at 3 percent, however there is minority talk of a downside surprise.
"While we acknowledge an outside risk of a 25 basis point rate cut today to 2.75 percent, a no change decision is most likely," ING strategists said in a note to clients.
"However, much has changed both globally and domestically since the BoC last met on 15 July. This should set the scene for a more dovish accompanying media statement."
(Reporting by Veronica Brown; Editing by Chris Pizzey)
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