* Dollar sags vs euro, yen after falling sharply on Fed minutes
* Dollar fall gives loonie, Aussie breather
* Speech by San Francisco Fed's Williams in focus
By Shinichi Saoshiro
TOKYO, Aug 20 (Reuters) - The dollar was on the defensive against the euro and yen on Thursday, having pulled back sharply after Federal Reserve meeting minutes suggested that policymakers were in no hurry to raise interest rates.
Fed officials widely agreed last month the economy was nearing the point where interest rates should move higher, but worried lagging inflation and a weak global economy posed too big a risk to commit to "liftoff."
That prompted traders positioned for a September rate increase to quickly unwind their bets, pushing the dollar in overnight trading to a three-week low of 123.68 yen JPY= , from a high of 124.47. The dollar last traded at 123.915.
The euro was steady at $1.1115 EUR= after surging 0.9 percent on Tuesday when the Fed minutes were released. The dollar index inched up 0.1 percent to 96.474 .DXY after an overnight loss of 0.7 percent.
"The minutes already reflected concern held by policymakers that inflation was not rising as desired even before the recent financial market turmoil," said Masafumi Yamamoto, senior strategist at Monex in Tokyo.
"The minutes have not factored in falling oil prices and events in China that have taken centre stage since the meeting in July. It would not be surprising if policymakers are even more dovish now in light of these events," he said.
Investors will have an opportunity to gauge the latest thinking of policymakers when San Francisco Fed President John Williams also delivers a speech in Indonesia later in the day.
"Williams is a centrist and voter and as he is speaking in Asia, may address concerns around developments in China delaying Fed liftoff," wrote Sean Callow, senior currency strategist at Westpac in Sydney.
The dollar's broad decline underpinned commodity currencies like the Canadian and Australian dollars, which had come under pressure earlier as oil prices plumbed fresh 6-1/2 year lows and persistent worries about China's economy sapped confidence.
The Canadian dollar edged up to C$1.3100 after hitting a low of C1.3180 overnight.
The Australian dollar was up 0.3 percent at $0.7370, rebounding from a one-week low of $0.7312.
(Editing by Shri Navaratnam)