Dollar nurses losses after Fed eyes fewer hikes

By Lisa Twaronite

TOKYO (Reuters) - The dollar nursed losses in Asian trading on Thursday after declining sharply following the U.S. Federal Reserve's decision to halve its outlook for interest rate hikes to two from four by the end of this year.

Fed policymakers noted that the U.S. economy faces risks from an uncertain global economy, even though moderate growth and "strong job gains" would allow it to tighten policy this year.

Against its Japanese counterpart, the dollar edged up 0.2 percent to 112.77 after skidding to a one-week low of 112.335 in the aftermath of the Fed's announcement.

The euro inched down 0.1 percent to $1.1214 after the Fed helped propel it to a one-month high of $1.1244.

The dollar index , which tracks the greenback against a basket of six major currencies, was down about 0.1 percent at 95.751, after plunging to a one-month low of 95.539 in the wake of the Fed announcement.

The index slid nearly 1.3 percent in the time between the Fed statement's release and the end of Fed Chair Janet Yellen's remarks, as investors ratcheted down their expectations that higher U.S. interest rates would lift the dollar anytime soon, and pondered when the next tightening would come.

"We doubt that the doves will be ready for a rate hike within the next six weeks. However, by June there may very well be a majority for a hike," analysts at Rabobank said in a note.

Ahead of the Fed, the dollar initially rose after data showed an increase in underlying U.S. inflation and the housing market continued to strengthen.

Later on Thursday, the Bank of England will also announce a policy decision, and is expected to stand pat.

A Reuters poll last week showed that most economists do not expect the BOE to raise rates until the first quarter of 2017, versus the fourth quarter of 2016 seen in a poll taken just a month before.

The pound was steady at $1.4252 , holding above the previous session's nearly two-week low of $1.4053.

(Reporting by Lisa Twaronite; Editing by Eric Meijer)