* Fed's less upbeat U.S. outlook still weighs on dollar
* Euro gains mainly flows-driven
* Aussie gives up gains after leadership change
* U.S. data largely in line with expectations
(Recasts; updates prices, adds quotes, changes byline)
By Gertrude Chavez-Dreyfuss
NEW YORK, June 24 (Reuters) - The dollar fell against the
euro and yen on Thursday, still reeling from a less bullish
outlook on the U.S. economy from the Federal Reserve the
previous session.
Gains by the euro against the dollar were mostly
flows-driven from real money or long-term investors, who have
been extremely short the single euro zone currency for some
time, traders said.
The Fed's less upbeat view on the U.S. economy gave these
investors an excuse to unwind some of their short positions in
the euro.
"The dollar has been well-offered for most of the session
and that's mostly on the back of the Fed's concerns about U.S.
growth," said John McCarthy, director of foreign exchange
trading at ING Capital Markets in New York.
Worries over Greece still hung over the euro zone as the
cost of protecting its government debt against default hit a
record high and traders say this should cap the euro's gains.
But they added that levels above $1.2350 should keep bids
on the euro and if it goes $1.2380-90 could trigger stops from
and $1.2400 and beyond, traders say.
In early afternoon trading, the euro rose 0.3 percent to
$1.2348 <EUR=EBS> against the dollar, having risen as high as
$1.2388, according to electronic trading platform
EBS.
The euro was down 0.2 percent versus the yen at 110.36 yen
<EURJPY=EBS>, while the dollar fell 0.5 percent to 89.40 yen,
after earlier hitting a one-month low at 89.22 <JPY=EBS>.
U.S. economic reports on weekly initial jobless claims and
durable goods orders for May came in largely in line with
expectations and saw the dollar extend declines against the
yen.
The U.S. dollar had already been under pressure in Asian
trading as investors initially took the view the Fed's renewed
pledge to keep rates on hold for an extended period would be a
positive for the world economy, briefly boosting risky assets
like commodity-linked currencies such as the Australian
dollar.
European investors chose to focus on the Fed's scaling back
of its assessment of the pace of recovery, leading them buy the
yen and also sell the dollar.
"The outlook from the Fed was more negative for interest
rates and the economy than it was before," said Joseph
Trevisani, chief market analyst at FX Solutions in Saddle
River, New Jersey.
Sterling rose to a 19-month high versus the euro. British
assets were still being bolstered by Tuesday's tough budget,
which investors perceive as necessary to tackle a huge deficit
as fiscal worries plague the euro zone. The pound last traded
at $1.4951 <GBP=>, down slightly on the day.
The Aussie dollar reversed gains after rising as high as
US$0.8771 <AUD=> as Australia's ruling Labor Party elected
Julia Gillard as the new prime minister 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 taxes.
The Aussie slipped to trade down 0.6 percent on the day at
US$0.8687.
