(Updated at 1500 EDT)

By Karen Brettell

Aug 21 (Reuters) - The dollar fell to a more than

one-year low against the euro and sterling on Wednesday after

data showed employers added 818,000 fewer jobs in the year to

March than previously thought.

The release comes before a highly anticipated speech by

Federal Reserve Chair Jerome Powell at the Kansas City Fed's

Jackson Hole economic symposium on Friday, which will be watched

for any new clues on his view of the labor market.

"It probably puts more weight on Powell's appearance at

Jackson Hole," said Vassili Serebriakov, an FX strategist at UBS

in New York. "It suggests the labor market was not as strong as

the Fed believed at the time and has been communicating. But

it's less clear what it means for the outlook going forward."

Markets are looking for clarity on the likely size of a rate

cut at the Fed's Sept. 17-18 meeting, and whether borrowing

costs are likely to be lowered at each subsequent Fed meeting.

"This is very consistent with the Fed starting to cut

rates. But it's harder to say what it means for the pace of

easing and other details," Serebriakov said.

Fed officials last month were strongly leaning toward an

interest rate cut at their September policy meeting and several

of them would have even been willing to reduce borrowing costs

immediately, according to the minutes of the July 30-31

gathering released on Wednesday.

Traders are now pricing in a 38% probability of a 50 basis

point cut next month, up from 33% early on Wednesday, and a 62%

chance of a 25 basis point reduction, according to the CME

Group's FedWatch Tool.

"It got easier for the Fed to cut rates now and through

year-end but I don't think (the jobs data) makes a strong case

for 50 basis points," said Adam Button, chief currency analyst

at ForexLive in Toronto.

"We know that it was a year of solid economic growth, that

company profits were fine and that the economy grew at a good

clip for the year ending in March," Button said.

Fewer-than-expected job gains in July and an unexpected

increase in the unemployment rate led traders to price for

larger rate cuts on concern the United States is facing an

imminent recession.

Those concerns were rowed back by better data, including a

strong retail sales report for July and also

higher-than-expected shelter inflation for the month.

But markets remain highly sensitive to jobs data for any new

signs that the economy is worsening at a quicker pace.

August's employment and inflation reports will be released

after Powell's speech but before the September meeting.

The dollar index was last down 0.33% at 101.03, the

lowest since Dec. 28. The euro rose 0.27% to $1.116,

the highest since July 2023.

Strength in the euro may be stretched after the recent

rally, said UBS' Serebriakov.

"You haven't seen a big move in U.S. rates. I don't think

the European data is especially positive for the euro. So, it

seems still a bit of a technical move in FX," he said.

Sterling strengthened 0.59% to $1.3101, also the

highest since July 2023.

The dollar weakened 0.34% to 144.74 Japanese yen,

the lowest since August 7.

Bank of Japan Governor Kazuo Ueda is expected to discuss the

central bank's decision last month to raise interest rates when

he appears in parliament on Friday.

The Bank of Japan will raise interest rates again by

year-end, according to more than half the economists in a

Reuters poll published on Wednesday, with those who had a view

on which month leaning towards a December increase.

Data next week is expected to show Japan's consumer

inflation rate picked up in July for a third consecutive month,

a Reuters poll of 18 economists showed.

In cryptocurrencies, bitcoin rose 2.47% to $60,769.