FOREX-Dollar bounces as Fed outlook frightens investors

* Dollar up as Fed forecasts hit mood
* Aussie and kiwi drop, yen gains extend to fresh 1-month
high
* Fed sees U.S. growth -6.5% in 2020, promises to keep
policy easy
* Graphic: World FX rates in 2020 https://tmsnrt.rs/2RBWI5E

By Tom Westbrook
SINGAPORE, June 11 (Reuters) - The dollar bounced against
riskier currencies and the safe-haven yen hit a one-month high
on Thursday as the U.S. Federal Reserve's dour economic outlook
spooked investors.
The moves recouped the greenback's initial losses after the
Fed's policy stance, projecting rates near zero for years, was
welcomed as a sign of its continued support for asset prices.
The Australian dollar AUD=D3 retreated from an 11-month
high and fell 1% to $0.6923 as investors took profit on a rally
that has carried the Aussie 3.8% higher in June. AUD/
The kiwi NZD=D3 gave up a four-and-a-half month high and
fell 0.7% to $0.6488. The yen JPY= rose marginally to 106.90,
its highest since mid May.
"The Fed met expectations, but at the same time it's brought
the focus back on the economy," said Moh Siong Sim, FX analyst
at the Bank of Singapore.
"There's also a sense that the rally has gone a bit too far
too fast, and while economic numbers have been getting less bad
it does not mean that it's good."
Fed policymakers projected the U.S. economy to shrink 6.5%
this year and the unemployment rate to be 9.3% at year's end.
"It is a long road," Fed Chair Jerome Powell said via video
link on Wednesday. "We are not even thinking about thinking
about raising rates."
It was enough of a reminder of how deep the globe's economic
troubles are to take the edge off two euphoric weeks in
financial markets, and sent investors out of stocks, away from
riskier currencies and back in to bonds and the dollar.
"That's been the follow-through, and it's played into a
broad rebound in the dollar," said Rodrigo Catril, FX analyst at
National Australia Bank in Sydney.
Sterling GBP= fell 0.6% to $1.2666 and there were losses
from the export-exposed South Korean won KRW= , which fell half
a percent, to the oil-sensitive Norwegian krone NOK= which
dropped about 1%.
Against a basket of currencies =USD the dollar erased
Tuesday losses to sit at 96.437.
The euro - which hit a three month peak overnight - put up
the best fight of the majors, sliding only 0.4%, leaving open
the possibility of more downside to come for the dollar once the
dust settles. The single currency EUR= last bought $1.1333.
"The takeaway is the Fed remains fully committed to its
ultra easy monetary polices," said NAB's Catril. "That should be
supportive for risk assets, and on a structural basis we still
think the U.S. dollar is embarking on a cyclical downturn."
Neither Powell nor the Fed's statement brooked any
suggestion that the central bank's massive liquidity injections
would be waning any time soon, with the statement promising bond
buying to continue "at least at the current pace".
Powell also said the question remains open as to whether the
Fed will use yield curve controls, reinforcing expectations that
it is gearing up to do so and pressing benchmark 10-year yields
back down under 0.8%. That provided at least one bright spot in Asia, with the
Thai baht THB=TH hitting an almost 5 month high and the
high-yielding Indonesian rupiah IDR= steady. EMRG/FRX
Markets are looking ahead to U.S. jobless claims data due at
1230 GMT.
A slight slowdown in jobless claims is expected, though some
traders might be primed for a positive surprise after Friday's
payrolls report showed a completely unexpected easing in the
jobless rate.