FOREX-Dollar falls vs most majors






The dollar fell against higher-yielding currencies such as the Australian dollar while the yen weakened on Wednesday, as the Federal Reserve's and Japan's commitment to low interest rates prompted investors to seek higher returns elsewhere.

The euro fell from five-week highs against the dollar as sentiment remained negative on the single euro-zone currency despite European Union members' pronouncements of support for debt-strapped Greece.

"If you look at the broader picture, we're seeing most major currencies -- sterling, Australian, and New Zealand dollars -- rallying against the U.S. dollar. Clearly, risk appetite is up," said John McCarthy, director of FX trading at ING Capital Markets in New York.

"But the euro is not following the rally in risky assets. It did touch above $1.38, but that's it. That tells me that the market still wants to sell the euro and if we fall below $1.37 again, you'll see selling in the euro gain momentum."

The Fed on Tuesday kept its pledge to keep interest rates low for an "extended period", while the Bank of Japan eased monetary policy, by doubling the funds available to banks for three-month loans at the policy rate.

The moves by the U.S and Japanese central banks generally supported risk assets. U.S. stocks gained and Tokyo's Nikkei share average rose to an eight-week closing high. European shares .FTEU3 followed suit, with the FTSEurofirst 300 .FTEU3 hitting its highest in two months.

Higher oil prices boosted commodity-linked currencies, including the Canadian dollar CAD=D4, which rallied to a 20-month high versus its U.S. counterpart.

Sterling was also one of the day's biggest movers, rising after the number of Britons claiming unemployment benefits in February fell. The pound's strength was mostly felt against the euro, which also weakened against the dollar and Swiss franc.

In midday New York trading, the euro fell 0.2 percent to $1.3745 EUR=, after hitting a five-week high of $1.3817, according to Reuters data. That earlier rally was a carry-over from news on Tuesday that Standard and Poor's removed Greece's ratings from a downgrade review.

The euro also fell to a 17-month low against the Swiss franc at 1.4480 EURCHF= as investors took out option barriers at 1.4500. The pair last traded at 1.4488, down 0.2 percent.

The ICE Futures' dollar index .DXY, which tracks the performance of the greenback versus a basket of six major currencies, was up 0.1 percent on the day at 79.822, after slipping to a six-week low of 79.520 in early European trade.

The dollar was up 0.2 percent at 90.39 yen JPY= against a broadly weaker Japanese currency.

The BoJ's decision to increase the funds available to banks was widely flagged. However, it left the duration of fixed-rate loans unchanged at three months and two of its seven board members dissented.

BoJ Governor Masaaki Shirakawa said the liquidity operation was not aimed at affecting exchange rates. Some in the market speculate Japanese authorities want to stem yen strength.

Sterling GBP=D4 jumped to $1.5382, its strongest against the dollar in nearly three weeks after jobs data. The pound was last at $1.5287, up 0.3 percent.

Minutes from the Bank of England's policy meeting earlier this month showed board members voted unanimously not to extend quantitative easing, which also boosted the pound.

Against the Canadian dollar, the U.S. unit fell as low as C$1.0097 CAD=D4, its weakest since July 2008, as the Canadian currency extended gains on the back of higher oil prices and a recent batch of strong economic data.