RPT-GLOBAL MARKETS-Dollar loss deepens vs yen, Asian stocks slip

                                
 * Dollar hits 2-month low vs yen after Fed minutes
                                
 * Asian shares ease, Nikkei down 1.2 percent
                                
 * Oil slips below $62 a barrel after steep gains
 (Repeats to more subscribers)
                                
 By Charlotte Cooper
                                
 TOKYO, May 21 (Reuters) - The dollar hit its lowest in two
months against the yen and Asian stocks fell on Thursday after
news that the Federal Reserve lowered its forecasts for U.S.
economic growth over the next three years.
                                
 Japan's Nikkei average <.N225> slipped 1.2 percent, dented
by the stronger yen which weighed on exporters including Honda
Motor Co <7267.T> and by technology shares which fell after the
world's biggest PC maker, Hewlett-Packard <HPQ.N>, tempered its
outlook for 2009.
                                
 Oil gave back some gains after rallying to a six-month
high, dipping below $62 a barrel <CLc1> after jumping more than
3 percent on Wednesday on news of a deep drop in U.S. crude and
gasoline stockpiles. [ID:nN20506528] [O/R]
                                
 The dollar plunged to its lowest in nearly five months
against the euro and a basket of six major currencies <.DXY> on
Wednesday after minutes showed Fed policymakers had mulled
buying more securities at their last policy meeting in April to
spur recovery-- a move which would inject more dollars into the
market. [ID:nN20492043]
                                
 It continued to teeter in Asian trade, hurt as well by
investor enthusiasm for risk in other currencies after Treasury
Secretary Timothy Geithner said the U.S. financial system was
"starting to heal" thanks to the government's bailout efforts.
                                
 In fresh quarterly forecasts, the Fed projected the U.S.
economy would contract by between 1.3 percent and 2.0 percent
this year, with the unemployment rate rising to between 9.2
percent and 9.6 percent.
                                
 In January, the Fed had forecast a milder contraction of
between 0.5 percent and 1.3 percent, with the jobless rate
rising to between 8.5 percent and 8.8 percent.
                                
 "As long as U.S. equities are not sliding sharply, the
tendency in the currency market is to view the global recovery
as still on," RBS strategist Alan Ruskin wrote in a client
note.
                                
 Near-zero U.S. interest rates, reallocation of funds parked
in low-yielding U.S. assets to weather the financial crisis and
latent concerns about the Fed's securities buying programme
were all conspiring to weigh on the dollar, Ruskin said.
                                
 "Taken collectively and despite a poor equity close, the
market is still in a mood to buy the risk trade dip, without
convincing evidence to do otherwise."
                                
 The dollar dropped 0.5 percent to 94.28 yen <JPY=> and
eased to $1.3797 per euro <EUR=>, after a trough below $1.3830
on Wednesday, and it hovered just above a seven-month low
against the Australian dollar <AUD=D4> set the previous day.
                                
 The MSCI index of Asian shares outside Japan
<.MIAPJ0000PUS> eased 0.3 percent after hitting its highest in
more than seven months on Tuesday.
                                
 Hong Kong <.HSI> fell 1.3 percent, while Australia's
S&P/ASX 200 index <.AXJO> shed 0.6 percent with bank stocks
leading the decline as optimism over the global economic
recovery waned on the Fed's cut in growth forecasts.
                                
 Shares in Seoul slipped 0.6 percent <.KS11> after losses on
Wall Street and as a stronger won <KRW=> weighed on automakers.
                                
 The gloomier Fed forecasts sent U.S. stocks lower.
[ID:nN20535614]
                                
 The Dow Jones industrial average <.DJI> fell 0.62 percent
to at 8,422.04, and the Standard & Poor's 500 Index <.SPX> lost
0.51 percent to 903.47, while the Nasdaq <.IXIC> eased 0.39
percent.
                                
 "The market probably did get a little bit ahead of itself,"
said Ben Potter, a research analyst at IG Markets Ltd in
Melbourne. "We are still getting some good signs on the economy
but there are a few more bad ones thrown in there as well."
                                
 In Japan, technology shares fell in the wake of losses by
their U.S. peers, with Sony Corp <6758.T> losing 1.6 percent,
despite saying it plans to halve the number of its parts and
materials suppliers. [ID:nBNG398847]
                                
 Among exporters, Canon Inc <7751.T> and Toyota Motor Corp
<7203.T> both fell, with investors fretting about the stronger
yen, which eats into overseas profits when they are
repatriated.
                                
 "The big issue is whether the yen is really heading into a
rising trend or not," said Hiroaki Osakabe, a fund manager at
Chibagin Asset Management.
                                
 U.S. Treasuries rallied on Wednesday after the release of
the minutes from the Fed policy meeting and prices edged higher
in Asian trade. The benchmark 10-year yield <US10YT=RR> eased
almost 1 basis point to 3.191 percent from late U.S. trade.
[US/]
                                
 Treasuries and the Nikkei's fall gave a lift to Japanese
government bond futures, with the lead month <2JGBv1> up 0.05
point at 137.23.
                                
 The Bank of Japan begins a two-day policy board meeting on
Thursday. But traders said the event is unlikely to have much
impact because the central bank is widely expected to keep its
interest rates near zero. [ID:nT231186]
                                
  Gold <XAU=> was trading at $939.15 an ounce, taking a
breather a day after hitting an eight-week high of more than
$940 per ounce on the rally in oil and the dollar's slide.
[GOL/]
 (Editing by Kim Coghill)