FOREX-Dollar hits three-year lows versus risk currencies after Fed's dovish message

* U.S. dollar at three-year lows vs Aussie dollar
* Euro-dollar crosses $1.22
* Graphic: World FX rates https://tmsnrt.rs/2RBWI5E

LONDON, Feb 25 (Reuters) - The dollar index fell to its
lowest since early January on Thursday and dropped to three-year
lows against the Australian and Canadian dollars, after dovish
signals from the U.S. Federal Reserve boosted the reflation
trade in currency markets.
Easy financial conditions, the promise of fiscal stimulus
and accelerating COVID-19 vaccine rollouts have driven money
into what's known as the reflation trade, referring to bets on
an upswing in economic activity and prices.
Commodity-linked currencies are placed to benefit from a
pickup in global trade, while investors have also cheered
Britain's progress in recovering from the coronavirus pandemic.
Fed Chair Jerome Powell reiterated on Wednesday that the
central bank will not tighten its policy until the economy
improves. "The improving global growth outlook continues to be
supported by loose monetary and fiscal policies," wrote Lee
Hardman, currency analyst at MUFG in a note to clients.
"For now we continue to see the current trading environment
as remaining supportive for commodity-related currency strength,
and recommended a long AUD/USD trade."
At 0824 GMT, the dollar index was down 0.1% at 89.92 against
a basket of currencies =USD .
The Australian dollar, which is considered a liquid proxy
for risk appetite, was up 0.3%, after reaching a three-year high
of 0.7994 versus the U.S. dollar at 0826 GMT AUD=D3 . The
Canadian dollar was also at a three-year high against the U.S.
dollar, at 1.2495 at 0757 GMT CAD=D3 .
The New Zealand dollar was close to the previous session's
three-year highs, flat on the day at 0.7446 at 0830 GMT
NZD=D3 .
Oil prices have rallied around 30% since the start of the
year, taking the commodity-linked Norwegian crown to its
strongest since late 2018 against the dollar NOK=D3 .
The euro touched its highest in over a month versus the
dollar, briefly rising above $1.22. At 0831 GMT, it was at
$1.2192, up 0.2% on the day EUR=EBS .
Euro-Swiss franc has surged this week, as investors quit the
safe-haven franc. The euro is in its eight consecutive session
of gains versus the franc and has had its strongest week in
percentage change terms since June 2020.
At 0834 GMT, the euro was up around 0.1% versus the franc,
at 1.1043 EURCHF=EBS .
"This is a big vote of confidence in the global recovery,
and we see EUR/CHF on track to meet our year-end forecast at
1.15," ING global head of markets Chris Turner wrote in a note
to clients on Wednesday.
Reuters polls found that market participants expect the bull
run in global stocks, fuelled by cheap liquidity and reflation
hopes, to continue for at least another six months. Bitcoin was steady around the $50,000 mark, having recovered
some of its losses from the start of the week BTC=BTSP .

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