* Aussie drops after more dovish-than-expected RBA minutes
* Caution ahead of Fed meeting, concerns about Iraq crisis
* Brighter U.S. data contrasts with downbeat IMF assessment
* Sterling steadies near 5-year highs; BOE minutes awaited
By Patrick Graham
LONDON, June 17 (Reuters) - The Australian dollar fell more than half a percent against the U.S. dollar on Tuesday after minutes from the country's central bank expressed more doubts about what is proving to be a messy economic recovery.
The Aussie's drop was the only serious action on major currency markets, where the euro, yen and dollar have been stuck in very tight ranges for the past week. But there was plenty more for investors to chew on.
Sterling was trading a touch lower but remained strong after topping $1.70 for the first time in five years. An interview with another policymaker offered more fuel for speculation the tide is turning at the Bank of England toward a rise in interest rates.
UK inflation later on Tuesday is expected to be softer but many analysts now expect minutes from the bank's meeting earlier this month to show at least one member of the council backing an immediate rate rise. The minutes will be released on Wednesday.
The minutes from the Reserve Bank of Australia expressed doubts as to whether it had done enough to stimulate the economy, knocking about half a cent off the dollar.
"I'm not sure there was that much in the comments really but we're in a slightly more risk-off sort of world at the moment and that probably made the Aussie more sensitive to this sort of message," said Daragh Maher, a strategist with HSBC in London.
The Australian economy, buffeted by a less certain outlook for growth in China, is struggling to shift focus away from the strong public spending and mining investment which has marked past years.
"The transition in activity was never going to be as simple or neat as hoped for amid numerous structural challenges," said Sue Trinh, a strategist with RBC Capital Markets in Hong Kong. "The RBA appears to be injecting a little more of that uncertainty into its communication."
The Aussie was 0.6 percent lower at $0.9353.
The pound has gained more than 1 percent since Bank of England Governor Mark Carney warned last Thursday the bank might raise rates earlier than markets had previously believed.
But that move seemed to have ground to a halt and even an apparent turn in the stance of one of the bank's policy committee's biggest supporters of looser conditions, David Miles, was not enough to push it higher as London opened.
The Times quoted Miles as saying he expected to have a vote for a rise in rates before his term ended next May. The pound was trading 0.05 percent lower against the dollar and a similar amount higher against the euro.
The dollar inched a touch higher but overall looked pinned to a narrow range by caution ahead of this week's U.S. Federal Reserve meeting and concern about escalating violence in Iraq.
Against the euro the greenback has struggled to build on an almost five cent surge in the aftermath of action by the European Central Bank two weeks ago to loosen monetary conditions and stimulate a still-moribund euro zone economy. The euro was last trading at $1.3560, flat on the day.
The Fed, meanwhile, is expected to announce a further reduction in its monthly bond purchasing programme, but most market participants do not expect a U.S. interest rate hike until mid-2015.
"There's a lot of chatter about the Fed's 'Dots' projections and what they say about where rates will be in 2015-16," said HSBC's Maher. "We see them falling off a bit but I think a lot of people are looking for them to rise, indicating a more hawkish drift."
The Dot projections offer an indication from the Fed of where it expects its benchmark Fed funds rate to be in the future. <0#FF:>
Against its Japanese counterpart, the dollar ticked up about 0.2 percent to 102 yen, holding well above a two-week low of 101.60 yen marked last Thursday. (Editing by Gareth Jones)