* Dlr pares loss, Fed's growth outlook dents risk sentiment
* Dollar index up 0.1 pct at 85.864 <.DXY>
* Euro hit as Greek spreads widen
* Aussie gives up gains after leadership change
(Adds quote, updates prices)
By Neal Armstrong
LONDON, June 24 (Reuters) - The dollar pared losses and the
yen rose on Thursday, as a less optimistic outlook on growth
from the U.S. Federal Reserve dented investors' appetite for
risk, while the euro was hampered by Greek debt markets.
The dollar had come under some pressure in Asian trade, as
investors initially took the view that the Fed's renewed pledge
to keep rates on hold for an extended period would be a positive
for the world economy.
But European investors chose to focus on the Fed's scaling
back of its assessment of the pace of recovery, leading them to
buy the yen and to a lesser extent, the dollar.
"As the U.S. fiscal stimulus starts to wane, it brings back
the deflationary argument. Together with weak U.S. data, there
are reasons to be pessimistic and that cannot be a positive
environment for risk," said Gavin Friend, currency strategist at
National Australia Bank.
By 1051 GMT, the dollar index, which tracks the performance
of the greenback versus a basket of six other major currencies,
was up 0.1 percent at 85.864 <.DXY>. It had earlier fallen to
85.595.
"The dollar pick-up was purely on rising risk aversion,"
said Christian Lawrence, currency strategist at RBC Capital
Markets.
In a statement at the end of a two-day meeting, the Fed took
note of pockets of weakness in the recovery, and also issued a
cautionary note about volatile markets in light of Europe's debt
woes. []
The euro fell 0.2 percent versus the dollar <EUR=> at
$1.2285, having risen to $1.2351 in Asia. Traders reported
semi-official demand at $1.2270, which supported the downside.
BUDGET FOCUS
Concerns over Greece were hanging over the euro zone, as the
cost of protecting its government debt against default hit a
record high. []
The euro was down 0.8 percent versus the yen <EURJPY=R> at
109.76 yen as European stocks traded with losses of around 0.8
percent <> and U.S. stock futures were down 0.6 percent
<SPc1>, pointing to a lower Wall Street open.
The yen also rose against the dollar, hitting a one-month
high at 89.26 yen <JPY=>.
Sterling rose to a 19-month high versus the euro
<EURGBP=D4>. British assets were bolstered on Tuesday by a tough
budget seen taking the necessary action to tackle a huge deficit
as fiscal worries plague the euro zone.
The Aussie dollar <AUD=D4> reversed gains after rising as
high as $0.8771 after Australia's ruling Labor Party elected a
new prime minister in Julia Gillard, in a bid to avoid election
defeat later this year. []
Gillard immediately offered to end a bitter dispute over a
controversial "super profits" mining tax, saying she would throw
open the door for fresh negotiations. But she stressed miners
should pay more tax. []
The Aussie slipped back to trade down 0.5 percent on the day
at $0.8690, weighed by the outlook for risk.
"I expect the political developments in Australia to be
supportive for the Australian dollar, but today it's all about
the downturn in risk appetite," National Australia Bank's Friend
said.
(Additional reporting by Tamawa Desai; Editing by Patrick
Graham)
