* U.S. politicians cite progress as stimulus talks continue * Vaccine roll-outs stoke risk appetite, undermining dollar * Some market players expect Fed to enhance bond purchase * Graphic: World FX rates in 2020 tmsnrt.rs/2RBWI5E TOKYO, Dec 16 (Reuters) - The dollar languished near 2-1/2-year lows on Wednesday as progress toward a massive U.S. government spending bill and COVID-19 relief measures whetted risk appetite, sapping demand for the safest assets. Also supporting sentiment, the U.S. expanded its roll-out of a vaccine from Pfizer Inc and German partner BioNTech SE , while another developed by Moderna Inc appeared set for approval this week. The British pound held on to more than 1% of gains made on Tuesday following a report that an elusive Brexit trade deal may now be close, even as British Prime Minister Boris Johnson repeated that the most likely outcome of talks was no deal. The dollar changed hands at $1.21630 per euro, near the 2 1/2-year low of $1.2177 touched on Monday. It traded at 103.44 yen, dipping 0.2% on Wednesday. The pound was last at $1.3463, following a 0.9% jump in the previous session. It reached $1.3540 earlier this month, a level not seen since mid-2018. “Because of all the positives that have hit the market, from vaccines to stimulus, we’re seeing dollar weakness across the board,” said Bart Wakabayashi, Tokyo branch manager of State Street Bank in Tokyo. “There’s a feel good momentum in the market.” Top U.S. congressional leaders began a second meeting on Tuesday to finalise $1.4 trillion in spending and end a standoff on coronavirus relief, after signalling optimism following their first gathering. Investors are also keeping an eye on the outcome of a two-day Federal Reserve policy meeting on Wednesday. Policymakers are expected to keep the key overnight interest rate pinned near zero and signal it will stay there for years to come, a decision that analysts say will further boost investors’ risk sentiment. Many analysts also expect new guidance on how long the Fed will keep up its massive bond-buying program. “The focus is whether the Federal Reserve will extend the duration of bonds it buys. I think the chance of the Fed doing so is relatively low and that we could see the dollar bouncing back if the Fed avoids that,” said Yujiro Goto, chief FX strategist at Nomura Securities. The dollar index, which measures the greenback against a basket of currencies, was last at 90.447, after sinking as low as 90.419 on Monday, a level not seen since April 2018. With its former support level of 91 now acting as a resistance, the index could head to as low as 88, said State Street’s Wakabayashi. It hit a three-year low of 88.251 in February 2018. “If we get some momentum to the downside I think we’ll start talking about 88 as the next level that. Although far away, I think that’s in play,” he said. The Australian dollar was little changed at 75.595 U.S. cents, near the 2-1/2-year high of 75.780 it recorded Monday. The New Zealand dollar traded at 71.05 U.S. cents after reaching 71.20 on Monday for the first time since April 2018. (Reporting by Kevin Buckland; Editing by Ana Nicolaci da Costa & Shri Navaratnam)