* Sterling hits 8-mth low vs dollar of $1.5685 * Pound follows euro lower, speculation of Greek default increases * BoE minutes this week may put sterling under more selling pressure LONDON, Sept 19 (Reuters) - Sterling hit an eight-month low against the dollar on Monday, tracking losses in the euro which stumbled due to a lack of new initiatives from European policymakers on how to help Greece avoid the possibility of a debt default. The pound fell as low as $1.5685, its weakest since early January. Domestic issues also battered sterling, as investors have been pricing in the possibility of more economic stimulus from the Bank of England to shore up the limping UK economy. Investors are looking to the minutes due on Wednesday from the UK central bank's monetary policy meeting earlier this month, given that BoE policymakers have pushed the door wide open to more quantitative easing, perhaps in October or November. "I think the minutes will show more votes in favour of QE," said Peter Kinsella, currency strategist at Commerzbank. "More downside in Cable would be the most obvious trade (if this is the case). I don't think euro/sterling will bounce considerably on this." He added that he expected concerns about whether Greece will be able to make its latest debt repayments to cap any upside in euro/sterling. The prospect of more quantitative easing is considered to be negative for sterling as it would flood the market with the currency, reducing demand. BoE policymaker Adam Posen called for more asset purchases last week, and although the comments from the dovish official did not come as a surprise, downbeat economic assessments from two of his more sceptical colleagues have raised speculation that the central bank may be considering more QE. Sterling traded at $1.5742 in early London trade, paring some losses but trading 0.3 percent lower on the day. It remained under downward pressure after breaking below $1.5781, a low hit in July which has become a key technical resistance level. Traders cited bids around $1.5670/80 as offering some near-term support for the pound. The euro slipped half a percent on the day to 86.96 pence. Analysts saw more room for the shared currency to fall due to speculation that Greece may not be able to deliver on the austerity measures required for it to secure another tranche of bailout funds. "With little positive news from Europe, we could see EUR/GBP trade towards 85.50 pence seen at the start of last week," analysts at Lloyds TSB said in a note. Any selling in the euro on concerns about the Greek debt crisis are expected to weigh on sterling versus the dollar, as investors are seen dumping higher-risk currencies for the relative safety of the U.S. currency. (Reporting by Naomi Tajitsu; Editing by Ruth Pitchford)

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