FOREX-Dollar jettisoned after Fed, risk appetite stoked

                                
 * Dollar index at 11-month low after Fed easing measures
                                
 * Riskier assets in demand, European stocks up 1.3 pct
                                
 * Euro hits 9-mth high but euro zone worries to slow gains
                                
 (Changes dateline, adds quote, detail, previous TOKYO)
                                
 By Neal Armstrong
                                
 LONDON, Nov 4 (Reuters) - The dollar fell sharply on
Thursday, hitting a 28-year low versus the Australian dollar, as
a Federal Reserve decision to buy more U.S. government debt
triggered demand for risk and undermined the U.S. currency.
                                
 The market concluded that the Fed's decision to buy $600
billion more in Treasuries by the middle of next year was in
line with expectations, spelling more dollar supply that would
be likely to weigh it down further.[ID:nFEDAHEAD]
                                
 The Fed's commitment to open-ended purchases of Treasuries,
implying low funding costs, brings into focus an expected
increased use of the dollar in carry trades, in which the U.S.
currency is used to fund purchases in commodities, emerging
markets and higher-yielding currencies.
                                
 As a result, the dollar slid to a 28-year low against the
higher-yielding Australian dollar and plumbed a fresh 10-month
trough against the euro.
                                
 "The risk now into year-end is that the dollar will go
lower, but I don't think the euro can go too much further due to
problems that still exist in the euro zone," said Tom Levinson,
currency strategist at ING.
                                
 Levinson said the $1.43 area could act as a cap for the euro
and highlighted this weekend's Greek local elections as a
potential banana skin for the single currency.
                                
 The euro <EUR=> traded at $1.4237, up around 0.7 percent on
the day, having touched a nine-month high at $1.4243. Traders
reported an option barrier at $1.4250.
                                
 The dollar index <=USD> <.DXY>, a gauge of its performance
against a basket of currencies, fell more than 0.7 percent to an
11-month low of 75.908, taking out trendline support from its
March 2008 lows.
                                
 <^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^
                                
 Link to PDF on Fed decision:   http://r.reuters.com/cyh73q
                                
 For more stories on Fed policy:                [FED/AHEAD]
                                
 For FOMC statement:                             [FED/FOMC]
                                
 For NY Fed statement:                      [ID:nN03121393]
                                
 Graphic on assets and QE       http://r.reuters.com/kyw48p 
                                
 ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>
                                
 Asian share markets rose on Thursday, with European markets
following suit to trade up around 1.3 percent <.FTEU3>. U.S.
stocks had closed with slight gains on Wednesday <.SPX>.
                                
 The Australian dollar, whose central bank raised rates by 25
basis points to 4.75 percent this week, hit a post-float high
above $1.0099 <AUD=D4>, with the New Zealand dollar rallying to
its highest since mid-2008 at $0.7896 <NZD=D4>.
                                
 The dollar fell 0.2 percent against the yen, easing to 80.90
yen per dollar <JPY=> and still close to its 1995 postwar record
low of 79.75 yen. A major Asian sovereign account was a seller
in European trade.
                                
 For dollar/yen, the key issue would be to see how far the
Fed's bond purchases pushed down U.S. yields.
                                
 "If they push down U.S. yields in the belly of the curve
then it could create downward pressure on the dollar/yen," said
Masafumi Yamamoto, chief FX strategist Japan at Barclays.
                                
 Yields on medium-term Treasuries fell after the Fed decision
on the view they would benefit most from the bond purchase
programme, while 30-year yields jumped in a sharp curve
steepening.
                                
 Still, traders remain on alert for possible yen-selling
intervention by Japanese authorities to weaken the yen.
                                
 The Bank of Japan meets on Nov. 4-5, having brought forward
its policy review from mid-November to speed up the launch of a
5 trillion yen ($62 billion) asset buying scheme.
                                
 Analysts had said the timing of the meeting gave the BOJ the
chance to act quickly if the Fed surprised the market and
triggered a new wave of dollar selling.
                                
 The European Central Bank, meeting on Thursday, was not
expected to show any signs of veering off its crisis exit path,
but there was an outside chance of more quantitative easing by
the Bank of England. [ID:nLDE6A00KZ] [ID:nLDE6A00ZO]
                                
 The Canadian dollar briefly weakened against the dollar
after Canada blocked BHP's <BHP.AX> bid for Potash Corp <POT.TO>
but it quickly erased losses to trade at C$1.0034 per dollar
<CAD=D4>, its highest since October 15. [ID:nN03272751].
(Additional reporting by Masayuki Kitano and Charlotte
Cooper in Tokyo, editing by Nigel Stephenson)