* Dollar hits 6-week lows vs basket of currencies
* Risk assets rally, euro fails to sustain gains
* Canadian dollar hits 20-month high vs U.S. dollar
(Updates prices, adds details)
By Gertrude Chavez-Dreyfuss and Wanfeng Zhou
NEW YORK, March 17 (Reuters) - The dollar fell against
higher-yielding currencies such as the Australian dollar on
Wednesday as the Federal Reserve's commitment to low interest
rates prompted investors to seek higher returns elsewhere.
The euro slipped after touching a five-week high against
the greenback earlier. Analysts said sentiment on the single
currency remained negative despite European Union members'
pronouncements of support for debt-strapped Greece.
"If you look at the broader picture, we're seeing most
major currencies -- sterling, Australian and New Zealand
dollars -- rallying against the U.S. dollar," said John
McCarthy, director of FX trading at ING Capital Markets in New
York. "Clearly, risk appetite is up."
The Fed on Tuesday kept its pledge to keep interest rates
low for an "extended period." The Bank of Japan eased monetary
policy on Wednesday by doubling the funds available to banks
for three-month loans at the policy rate.
In late trading, the ICE Futures' dollar index <.DXY>,
which tracks the performance of the greenback versus a basket
of six major currencies, fell 0.1 percent to 79.710, after
slipping to a six-week low of 79.507.
The euro fell 0.2 percent to $1.3738 <EUR=> after hitting a
five-week high of $1.3817, according to Reuters data.
"The euro is not following the rally in risky assets. It
did touch above $1.38, but that's it. That tells me that the
market still wants to sell the euro and if we fall below $1.37
again, you'll see selling in the euro gain momentum," ING's
McCarthy said.
The European Union's executive reassured Greece on
Wednesday that the bloc was ready to help Athens overcome its
financial problems but provided no details of how this would be
achieved. []
The euro also fell near a 17-month low against the Swiss
franc at 1.4477 <EURCHF=>, according to Reuters data, as
investors took out option barriers at 1.4500.
The dollar was little changed at 90.24 yen <JPY=>.
The BoJ's decision to increase the funds available to banks
was widely flagged. However, it left the duration of fixed-rate
loans unchanged at three months and two of its seven board
members dissented.
BoJ Governor Masaaki Shirakawa said the liquidity operation
was not aimed at affecting exchange rates. Some in the market
speculate Japanese authorities want to stem yen strength.
Sterling was one of the day's biggest movers, rising after
the number of Britons claiming unemployment benefits in
February fell. []
Sterling <GBP=D4> jumped to $1.5382, its strongest against
the dollar in nearly three weeks, and was last at $1.5325, up
0.5 percent.
Minutes from the Bank of England's policy meeting earlier
this month showed board members voted unanimously not to extend
quantitative easing, which also boosted the pound.
Higher oil prices help lift commodity-linked currencies.
Against the Canadian dollar, the U.S. unit fell as low as
C$1.0071 <CAD=D4>, its weakest since July 2008, and last traded
at C$1.0101, down 0.3 percent.
(Editing by Kenneth Barry)
