FOREX-Dollar's post Fed gains fizzle as long rate pause seen

* Graphic: World FX rates in 2020 https://tmsnrt.rs/2RBWI5E

By Saikat Chatterjee
LONDON, Sept 17 (Reuters) - Having ridden a short-covering
rally sharply higher after the Federal Reserve left interest
rates on hold, the U.S. dollar erased virtually all of those
gains on Thursday as markets digested the U.S. central bank's
policy statement.
The greenback rebounded across the board in late Asian
trade, posting its biggest daily rise in more than a week as
dealers unwound short positions taken ahead of the Fed decision.
But with the new guidance from the Fed focused on keeping
U.S. interest rates at current record lows until employment and
inflation reach its targets, some strategists argue any dollar
strength is likely to be temporary.
At its policy meeting, the Fed pledged to keep rates near
zero until at least the end of 2023 when the labour market
reaches "maximum employment" and inflation is on track to
"moderately exceed" the 2% target. With these conditions last met between March and October
2018, and before that in 2000, Commerzbank strategists said the
Fed was imposing conditions for rate hikes that were met only
very rarely in the past.
"The headlines focus mainly on the fact that the Fed does
not expect any rate hikes until year-end 2023 based on its
revised projections, but if one takes the forward guidance
literally it might take much longer until rate hikes will be
considered," they said.
Against a basket of its rivals, the dollar index =USD rose
about 0.32% to trade at 93.493 before erasing most of its gains
to trade nearly flat on the day at 93.22. It fell to more than
two-year lows below 92 earlier this month.
The dollar's weakness helped stem some of the selling
pressure on other currencies such as the euro and the Australian
dollar.
The single currency EUR=EBS briefly hit a one-month low in
Asian trading at $1.1737 before trimming some losses to stand
0.2% lower on the day at $1.1792.
Among Asian currencies, the Australian dollar AUD=D3 was
the hardest hit, falling 0.4% to $0.72770 despite strong jobs
data.
The safe-haven Japanese yen JPY=EBS changed hands at
104.76 against the greenback, a 2-1/2-month high.
The pound was broadly flat at $1.2958 GBP=D3 , after
dropping more than 3.5% against the greenback and the euro last
week. Sterling traders are now focusing on a meeting of the UK
central bank, where it is likely to signal it is ready to pump
more stimulus into Britain's coronavirus-hit economy.
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USD chart for mktreport https://tmsnrt.rs/2FpA8wr
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