FOREX-U.S. dollar tumbles; Aussie soars to 28-yr high

                                
 * Riskier assets in demand; Wall Street, Europe shares up
                                
 * Euro hits 9-month high, but euro zone woes to slow gains
                                
 * BoE, ECB keep rates unchanged
 (Adds quotes, updates prices)
                                
 By Gertrude Chavez-Dreyfuss
                                
 NEW YORK, Nov 4 (Reuters) - The U.S. dollar slumped on
Thursday, hitting a 28-year low against the Australian currency
and a more than nine-month trough against the euro as a Federal
Reserve decision to buy more Treasuries pushed U.S. yields
lower and prompted investors to seek returns elsewhere.
                                
 The Fed's commitment to open-ended purchases of Treasuries,
implying low funding costs, brings into focus an expected
increased use of the dollar in carry trades in which the U.S.
dollar is used to fund purchases in commodities, emerging
markets and higher-yielding currencies.
                                
 "What you achieve with quantitative easing is that you
signal to investors not to buy U.S. government securities, take
the money elsewhere, which in turn will weaken the dollar and
spur economic growth," said Axel Merk, president and portfolio
manager at Merk Investments in Palo Alto, California.
                                
 A weaker dollar is viewed as inflationary, but should help
boost a flagging U.S. export sector.
                                
 "The Fed in my view is trying to debase the dollar because
printing all that money is not going to spur growth on its
own," said Merk, who runs the company's $500 million currency
mutual fund.
                                
 In contrast to the Fed, the Bank of England on Thursday
said it made no changes to its asset purchasing plan. Analysts
had initially expected the BoE to follow the Fed.
                                
 The European Central Bank, meanwhile, kept interest rates
unchanged at 1 percent on Thursday with ECB President
Jean-Claude Trichet making no major announcement.
                                
 He did, however, say that Fed policy actions do not suggest
that the the United States was actively seeking a weaker
dollar. For details, see [
                                
 He also said that a euro at $1.50 today would be the
equivalent of $1.35 in 2007 terms.

                                
 "I think the euro is in a secular trend which is an
appreciation ... Asia is a positive force for the euro's
appreciation. It is in a stage of development that needs a lot
of capital goods," Broda said, adding Germany -- the biggest
euro zone member -- is a beneficiary of Asia's need for capital
goods.
                                
 The dollar index <.DXY>, a gauge of its performance against
a basket of six currencies, fell to an 11-month low at 75.698,
taking out trendline support from its March 2008 lows. The
index was down 0.9 percent at 75.768.
                                
 <^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^
                                
 Link to PDF on Fed decision:   http://r.reuters.com/cyh73q
                                
 For more stories on Fed policy:                [FED/AHEAD','yes')">ID:nLDE6A3217
                                
 In midday New York trade, the euro <EUR=EBS> was at
$1.4220, up 0.5 percent on the day, having touched a
9-1/2-month high at $1.4273, according to EBS data. Traders
reported that an option barrier at $1.4250 was taken out. There
are more barriers at $1.43.
                                
 Bids on the euro are also expected around $1.4200-$1.4220.
                                
 Technical strategists also flagged the $1.4365 level, the
78.4 retracement of the move from the November high of $1.5140
to the June $1.1875 slide.
                                
 EURO AT $1.50 NOT WHAT IT USED TO BE
                                
 Some market participants are forecasting the euro to hit
$1.50 in short order.
                                
 But Christian Broda, managing director at the $12 billion
hedge fund Duquesne Capital Management noted "$1.50 is not what
it used to be in 2006-2007" in real exchange rate terms.
                                
 He also said that a euro at $1.50 today would be the
equivalent of $1.35 in 2007 terms.
                                
 "I think the euro is in a secular trend which is an
appreciation ... Asia is a positive force for the euro's
appreciation. It is in a stage of development that needs a lot
of capital goods," Broda said, adding Germany -- the biggest
euro zone member -- is a beneficiary of Asia's need for capital
goods.
                                
 The dollar index <.DXY>, a gauge of its performance against
a basket of six currencies, fell to an 11-month low at 75.698,
taking out trendline support from its March 2008 lows. The
index was down 0.9 percent at 75.768.
                                
 <^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^
                                
 Link to PDF on Fed decision:   http://r.reuters.com/cyh73q
                                
 For more stories on Fed policy:                [FED/AHEAD]
                                
 For FOMC statement:                             [FED/FOMC]
                                
 For NY Fed statement:                      [ID:nN03121393]
                                
 Graphic on assets and QE       http://r.reuters.com/kyw48p
                                
 ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>
                                
  The Australian dollar, whose central bank raised rates by
25 basis points to 4.75 percent this week, hit a post-float
high at US$1.0148 <AUD=D4>. It was last at US$1.0136, up 0.8
percent. The New Zealand dollar rallied to its highest since
mid-2008 at US$0.7976 <NZD=D4>, and was up more than 2 percent
on the day at US$0.7961.
                                
 Currency volatility, a gauge of market sentiment,  fell in
a variety of currencies on Thursday. One-month implied
volatility for the Australian dollar fell to 13.55 vols from
14.05 on Wednesday, while that of the New Zealand dollar slid
to 12.95 vols from 13.65 the previous session.
                                
 Lower volatility tends to improve risk appetite and are
usually a go-signal to increase carry trades, particularly long
positions in the Aussie or New Zealand dollars.
                                
 Against the yen, the dollar eased to 80.63 yen <JPY=>,
close to its 1995 postwar record low of 79.75. A major Asian
sovereign account was a seller in European trade. Traders
remained on alert for possible yen-selling intervention by
Japanese authorities.