FOREX-Dollar knocked in rush to quit long bets, UK election awaited

* Fed outlook hits dollar; Aussie, kiwi soar
* Investors on edge as tariffs, UK election, ECB loom
* Hong Kong dollar jumps
* Graphic: World FX rates in 2019 http://tmsnrt.rs/2egbfVh

By Tom Westbrook
SINGAPORE, Dec 12 (Reuters) - The dollar nursed its steepest
losses in weeks on Thursday, as the Federal Reserve's forecast
that it would hold rates through 2020 sparked an unwinding of
long positions in the greenback.
Investors were also on edge ahead of Sunday's deadline for a
new round of U.S. tariffs on China, and a European Central Bank
(ECB) meeting and the UK election later on Thursday.
The dollar hit its lowest in more than a month against the
euro EUR= at $1.1143 and stayed there, while sterling GBP=D3
drifted higher ahead of the election. Against a basket of
currencies .DXY the dollar sat at a four-month low of 97.038.
The Japanese yen JPY= held on to overnight gains at 108.55.
"The Fed has basically given the market confirmation that
the three rate cuts we've had recently are not going to be
reversed any time in the next year," said Stuart Oakley, global
head of flow FX at Nomura in Singapore.
"Dollar rates are lower, and they're going to stay that way
for a while," he said.
Fed Chairman Jerome Powell said the economic outlook for the
U.S. was favourable as the central bank announced its decision
to hold rates steady, as expected, though forecast only moderate
and slowing growth through 2020 and 2021. New economic projections showed 13 of 17 Fed policymakers
foresee no change in interest rates until at least 2021.
Among the biggest winners were the Australian and New
Zealand dollars, which soared as shorts scrambled to sell.
The normally somnolent Hong Kong dollar HKD=D3 also
climbed to a five-month high, with some analysts attributing the
gains to profit taking as investors unwound lucrative "carry"
trades ahead of the year-end. Long dollar bets hit a five-month high last week, with bets
against the Aussie at a record high. 0#NETUSDFX=
"At some point even a stable Aussie should eventually be
enough for some of those positions to be trimmed," said Westpac
analyst Sean Callow. "But the Aussie's just declining to
collapse...it's held up better than many would have expected."
The Aussie AUD=D3 added 1% overnight and sat just under a
one-month high at $0.6882 on Thursday. The kiwi dollar NZD=D3
hovered just below a four-month high hit overnight at $0.6581.
Bond yields also slid after the Fed decision. CALENDAR
Investor focus now shifts to the looming trade deadline,
Christine Lagarde's first meeting at the helm of the ECB, and
voting in the British election.
U.S. President Donald Trump is expected to meet with top
advisers on Thursday about the tariff deadline, three people
familiar with his plans told Reuters. A fourth person familiar
with the administration's thinking said they expected the
tariffs to be enforced. Lagarde is all but certain to keep money taps wide open, but
investors will be curious to tune in to her first post-meeting
press conference to seek clues about a broader policy revamp
that could become the cornerstone of her tenure. That is due to begin at 1330 GMT. Before then, at 0700 GMT,
voting begins in the United Kingdom, where polls have tightened
recently but still predict a Conservative victory. The pound is priced for a Conservative majority that could
control parliament and lead Britain out of the European Union at
the end of January, and anything short of that could prompt a
slide.
The dollar's weakness helped sterling GBP=D3 edge up to
$1.3217 on Thursday. Cable's overnight implied volatility has
soared to its highest since the 2016 Brexit referendum
GBPONO= .
Voting ends at 2200 GMT, with exit polls and early results
likely to flow after that and traders expecting an outcome as
early as 0300 GMT on Friday.
"Prices should jump around...with likely sharp reactions as
each constituency releases their results," said Chris Weston,
head of research at Melbourne brokerage Pepperstone.
"One for the bravest of souls."

(Editing by Sam Holmes and Jacqueline Wong)