FOREX-Dollar licks wounds as Fed disappoints bulls, UK election awaited

* Fed outlook hits dollar; Aussie, kiwi soar
* Investors on edge as tariffs, UK election, ECB loom
* 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, after the U.S. Federal Reserve's
benign inflation outlook hosed down expectations for a rate hike
any time soon, pushing Treasury yields lower.
Investors also remained on edge as Sunday's deadline for the
next round of U.S. tariffs on Chinese goods looms, and ahead of
a European Central Bank (ECB) meeting and the UK election later
on Thursday.
The greenback hit its lowest in more than a month against
the euro EUR= after the Fed meeting, and sat just above that
level at $1.1133 in early Asian trade. Against a basket of
currencies .DXY the dollar recovered somewhat from an
overnight four-month low, but remained subdued at 97.413.
The yen JPY= crept higher to 108.47 per dollar.
The biggest winners were the Australian and New Zealand
dollars, which soared as shorts scrambled to exit their
positions. Traders said some had bet on a more hawkish Fed
outlook.
"The Fed was not as optimistic as people thought, and that
is consistent with a lower U.S. dollar and the fall in bond
yields that we saw," said Commonwealth Bank of Australia analyst
Joe Capurso.
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.
The kiwi dollar NZD=D3 hit its highest since July after
that, and was steady at $0.6581 on Thursday. The Aussie AUD=D3
added 1% to hit a one-month high, and gave back only a fraction
of that in early trade to hover around $0.6868.
Bond yields also slid after the 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= drift higher
to $1.3210 on Thursday.
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 release their results," said Chris Weston,
head of research at Melbourne brokerage Pepperstone.
"We are watching GBP/USD overnight implied volatility as it
rolls over, and there is no doubt it will be sky-high, with
traders pricing some punchy moves in the pound. One for the
bravest of souls."