FOREX-Dollar rallies as cautious Fed clouds rate-cut outlook

* Fed Chairman Powell sounds positive on U.S. economy
* Dollar rises to 7-week high vs yen, 3-month peak on Swiss
franc
* Australian employment data eyed as crucial to rates
outlook

By Tom Westbrook
SINGAPORE, Sept 19 (Reuters) - The dollar stood tall on
Thursday after the U.S. Federal Reserve cut rates by 25 basis
points, as expected, but its chairman signalled a higher bar for
future rate cuts.
The greenback touched a seven-week high of 108.47 against
the Japanese yen JPY= and stood just below that in Asian
morning trade. It also rose on the Swiss franc CHF= , hitting a
three-month high, and climbed against other major currencies.
The New Zealand dollar NZD=D3 briefly jumped 0.2% after
June-quarter gross domestic product landed higher than
expectations, before being swamped by a rising greenback. The
Aussie AUD=D3 fell ahead of jobs data due at 0130 GMT.
The U.S. central bank, on a 7-3 vote, lowered the Fed funds
target rate on Wednesday to a range of 1.75% to 2.00% "in light
of the implications of global developments for the economic
outlook."
However, Fed Chairman Jerome Powell described U.S. prospects
as "favourable" and the rate move as "insurance." He did not
rule out future cuts, but his remarks were not as dovish as
markets had hoped for which lifted bond yields and the dollar.
Projections published by the Fed showed policymakers, at the
median, expected rates to stay within the new range through
2020, while futures markets have priced in at least another cut.
"In the short term, this hawkish cut should still see the
dollar well-bid, given that the path of interest rates outlined
by the Fed is not close to that priced into the markets," said
John Veils, Americas FX and macro strategist at BNY Mellon.
"The USD is still the highest-yielding currency in the G10
world, a sign that it is also the least unattractive house in an
increasingly blighted neighbourhood."
The dollar rose 0.3% on the euro EUR= after the Fed
decision and steadied at $1.1027 on Thursday. It gave up some
gains on the pound to hold around $1.2468.
Its strength on the yen may also reduce pressure for further
easing from the Bank of Japan, which meets later on Thursday and
is widely expected to keep rates on hold.
The New Zealand dollar NZD=D3 popped to $0.6332 when
quarterly growth came in a fraction higher than forecasts,
though with year-on-year expansion at its slowest since 2013 the
beat has done little to shift expectations of future monetary
easing there. The Australian dollar AUD=D3 dropped to $0.6811 ahead of
jobs data that is likely to provide a read on the interest rate
outlook.
The Reserve Bank of Australia has indicated that it could
ease again unless employment grows. "An uptick in the unemployment rate likely to push up
expectations for an October RBA cut," ANZ analysts said in a
note. "Risks (are) to the downside," they added

(
Editing by Jacqueline Wong)