FOREX-Dollar drops to 2-week low vs yen on change in Fed outlook - Reuters

    * Dollar weaker on Fed's dovish policy guidance
    * Euro, Aussie, kiwi dollar, franc, yen gain
    * Graphic: World FX rates in 2019 tmsnrt.rs/2egbfVh

 (Recasts, adds comment, U.S. data, FX table, updates prices,
changes byline, dateline; previous LONDON)
    By Gertrude Chavez-Dreyfuss
    NEW YORK, Jan 31 (Reuters) - The dollar fell against most
major currencies on Thursday, dropping to a two-week low versus
the yen, pressured by the  Federal Reserve's cautious U.S.
economic outlook suggesting the central bank is near the end of
its tightening cycle.
    The Fed's dovish stance in Wednesday's policy statement took
the market by surprise even though it has preached patience and
balance sheet flexibility for some time. Analysts said the
statement felt like the Fed did a turnaround from its previous
generally upbeat stance.
    Over the last two months, the dollar index, which
tracks the currency versus six major rivals, has fallen around
2.0 percent, on track for its worst two-month performance in a
year.
    The Fed said it would be patient in raising interest rates
further this year as it pointed to growing uncertainty about the
U.S. economic outlook.
    But it did not rule out using a range of tools, including
altering the size and composition of its balance sheet, as well
as rate cuts, if the economy warranted it.
    "The Fed meeting had to be the definition of an about-face,"
said Mazen Issa, senior FX strategist at TD Securities in New
York. "At the very least, the shift in stance augurs for
continued U.S. softness."
    He expects the dollar's downward path to be "more of a
grind", rather than an "impulsive shift lower."
    TD Securities has now changed its Fed forecast, Issa said.
It expects the Fed to hike just one more time, instead of twice,
and this would be the last for this cycle.
    In mid-morning trading, the dollar fell 0.3 percent against
the yen to 108.75 after earlier falling to a two-week low
of 108.51.
    The greenback also fell 0.2 percent against the Swiss franc,
to 0.9921 franc, and was down 0.1 percent against the
euro, which traded at $1.1487.
    The dollar index, meanwhile, was flat on the day at 95.337,
recovering from a three-week low.
    Data showing that the number of Americans filing for
unemployment benefits surged to near a 1-1/2-year high last week
weighed on the dollar as well.
    But the numbers may have been skewed by the five-week
shutdown of the federal government that has since ended.
    U.S. new home sales were upbeat, rising nearly 17 percent in
November, but that did not impact the dollar.
    Cautious words from the Fed sent perceived risk-oriented
currencies such as the Australian dollar and the New
Zealand dollar rallying against the greenback.
    The Canadian dollar also benefited from a 15
percent rally in oil prices, with Canada a major exporter.
    
    ========================================================
    Currency bid prices at 10:42 AM (1542 GMT)
 Description      RIC         Last           U.S. Close  Pct Change     YTD Pct     High Bid    Low Bid
                                              Previous                   Change                 
                                              Session                                           
 Euro/Dollar      EUR=        $1.1483        $1.1477     +0.05%         +0.13%      +1.1515     +1.1471
 Dollar/Yen       JPY=        108.7400       109.0200    -0.26%         -1.38%      +109.0700   +108.5100
 Euro/Yen         EURJPY=     124.90         125.15      -0.20%         -1.05%      +125.2900   +124.5900
 Dollar/Swiss     CHF=        0.9922         0.9941      -0.19%         +1.10%      +0.9952     +0.9921
 Sterling/Dollar  GBP=        1.3121         1.3116      +0.04%         +2.85%      +1.3156     +1.3100
 Dollar/Canadian  CAD=        1.3136         1.3147      -0.08%         -3.67%      +1.3165     +1.3120
 Australian/Doll  AUD=        0.7286         0.7246      +0.55%         +3.36%      +0.7288     +0.7243
 ar                                                                                             
 Euro/Swiss       EURCHF=     1.1396         1.1412      -0.14%         +1.26%      +1.1429     +1.1393
 Euro/Sterling    EURGBP=     0.8750         0.8749      +0.01%         -2.60%      +0.8767     +0.8732
 NZ               NZD=        0.6932         0.6891      +0.59%         +3.20%      +0.6936     +0.6889
 Dollar/Dollar                                                                                  
 Dollar/Norway    NOK=        8.4150         8.4238      -0.10%         -2.59%      +8.4323     +8.4005
 Euro/Norway      EURNOK=     9.6656         9.6715      -0.06%         -2.43%      +9.6817     +9.6549
 Dollar/Sweden    SEK=        9.0182         9.0432      -0.23%         +0.61%      +9.0433     +9.0117
 Euro/Sweden      EURSEK=     10.3580        10.3818     -0.23%         +0.92%      +10.3865    +10.3520
 
    
 (Reporting by Gertrude Chavez-Dreyfuss; Additional reporting by
Tom Finn and Saikat Chatterjee in London; Editing by Dan
Grebler)
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