* Yen, dollar fall broadly as risk aversion cools
* European stocks rise 2 percent; Fed meeting eyed
* Talk of further Fed measures to boost economy
* Weak Swiss data dents franc; RBNZ seen cutting rates
(changes byline, adds quotes, updates prices)
By Veronica Brown
LONDON, Jan 28 (Reuters) - The dollar and yen fell broadly
on Wednesday, with rallying world share prices reflecting a
cooling of risk aversion as investors turned their attention to
the U.S. Federal Reserve's policy meeting later in the day.
Positive earnings on Wall Street the previous day helped to
drive up European and Asian shares, while a key U.S. Senate
panel expanded a proposed economic stimulus package to about
$887 billion on Tuesday [].
The euro found support as consumers in France and Germany
showed surprising resilience to widespread business pain with
confidence indicators bucking dire expectations []
[].
Although U.S. policymakers seem to have run out of interest
rate ammunition with the benchmark rate already targeted at zero
to 0.25 percent markets will be looking for any announcement of
new policy measures, such as purchasing long-dated Treasuries.
Such a move would lower borrowing rates, seen as vital to
stabilising the recession-hit U.S. economy.
"Everyone is quite rightly expecting something -- especially
as the Treasury started talking about buying purchasing mortgage
backed securities, which they already started doing, and
evaluating the merits of buying Treasuries," said Chris Turner,
head of FX research at ING in London.
"Maybe they have to show more details -- they can't just say
they are still evaluating," he added.
Turner also said that markets would be expecting more from
new Treasury Secretary Timothy Geithner on the proposed stimulus
package and talk that the U.S. will set up a "bad bank" to mop
up toxic assets.
By 1210 GMT the euro was up 0.7 percent against the dollar
<EUR=> at $1.3273 and 1.1 percent versus the yen <EURJPY=R> at
118.52 yen. The dollar gained 0.3 percent to 89.25 yen <JPY=>.
The pound <GBP=> bounced after its slump to a 23-year low
last week, hitting a one-week high of around $1.4325. The euro
lost 0.4 percent against sterling <EURGBP=> to 92.77 pence.
Mirroring ebbing risk aversion, world stocks rose 0.9
percent on the day <.MIWD00000PUS>.
CONCERNS REMAIN
Investors were taking heart from positive signs on U.S.
President Barack Obama's planned stimulus plan to stem the
recession in the U.S., with Democrats hopeful they have enough
votes to push it through.
But analysts warned that the global economic outlook
remained bleak and that slightly more positive sentiment seen
this week could quickly turn.
"Global growth and demand are still the key and confidence
is shot," IDEAGlobal strategist Maurice Pomery said in a note to
clients.
"The bigger themes remain and I still believe the dollar
will do well and yen strength with continue".
The International Monetary Fund (IMF) is due to release
revised forecasts later in the day, and a Group of 20 finance
official told Reuters on Monday the fund would slash its
projection for 2009 global growth to 0.5 percent from 2.2
percent in its last economic outlook in November.
The Swiss franc fell to its lowest level so far this year
against the euro after the key KOF economic barometer on
Switzerland fell to its lowest since the series began in 1991
[]. The euro hit its highest since late December at 1.5156
Swiss francs <EURCHF=>.
Meanwhile, data out of Australia overnight showed consumer
prices fell by their biggest amount in a decade during the
fourth quarter, justifying talk of another aggressive interest
rate cut next week. [].
The Australian dollar initially dipped after the data, but
the higher-yielding currency later recovered, helped by the
pick-up in equities. It was last trading up 1 percent at $0.6691
<AUD=> versus the U.S. dollar.
The New Zealand dollar fell, however, ahead of a Reserve
Bank of New Zealand rate decision overnight, where analysts
expect a large rate cut, possibly of 100 basis points, from the
current level of 5.00 percent.
The currency was last quoted at $0.5298 <NZD=> versus its
U.S. counterpart.
(Additional reporting by Jessica Mortimer in London)
(Reporting by Veronica Brown; Editing by Ian Jones)
