* Fed highlights better US econ outlook, stoking risk demand
* Dollar, yen fall; euro, higher yielding Aussie dollar gain
* Swine flu, Chrysler crisis linger in the background
* Dollar pares some losses as investors take profit
(Adds quotes, updates prices, changes byline)
By Jessica Mortimer
LONDON, April 30 (Reuters) - The dollar and the yen fell
broadly on Thursday as growing hopes that the global economy may
be over the worst of the recession diminished the attraction of
those currencies perceived to be safer assets.
Investors took heart from Wednesday's Federal Reserve
statement pointing to an improved U.S. economic outlook
[].
This fuelled strong gains in equities, with European shares
up 2 percent, which boosted the euro while the Australian dollar
-- which is typically seen as higher risk -- jumped, hitting a
six-month high against its U.S. counterpart.
The optimistic tone of the Fed's statement offset earlier
news that the U.S. economy contracted sharply in the first
quarter, keeping intact a broad improvement in sentiment and
pushing the dollar to a 3-week low against a currency basket.
"Markets are still very much in a risk appetite mood and
this looks set to continue for the time being," SEB currency
strategist in Stockholm Carl Hammer said.
The dollar came off earlier lows later in the session,
however, as traders said some investors opted to buy the
currency at more attractive levels, particularly given that
several risk factors continue to lurk in the background.
The risk of the swine flu outbreak hampering the global
economic recovery increased as the World Health Organisation
said a pandemic was imminent [], while reports
emerged of an imminent bankruptcy filing by Chrysler.
Market players also remain wary ahead of Monday's release of
the U.S. stress tests on banks.
At 1206 GMT, the dollar index <.DXY>, which tracks the U.S.
currency's performance against the nation's biggest trading
partners, fell 0.2 percent to 84.455, having fallen as low as
83.885, its lowest since early April.
The euro gained 0.1 percent against the U.S. currency to
$1.3280 <EUR=>, though it was off an earlier two-week high of
around $1.3384.
The higher-yielding Australian dollar gained 0.8 percent
against the dollar to $0.7309 <AUD=>, having earlier hit a
six-month high of $0.7383.
The yen was broadly weaker meanwhile, with the dollar up 0.6
percent at 98.08 yen <JPY=> and the euro rose 0.7 percent to
130.29 yen <EURJPY=R>, not far from an earlier two-week high
around 130.90 yen.
HOPE NOT REALITY
Data on Wednesday showing a rise in euro zone unemployment
to 8.9 percent in March from an upwardly revised 8.7 percent in
February underlined the view that the region's economy remains
weak.
Other data showed that euro zone inflation remained at a
record low of 0.6 percent year-on-year in April [],
highlighting that although there have been some more positive
signs the fundamental picture remains bleak.
"Risk continues to build over the next month or so and that
will play as dollar negative," said Paul Robson, strategist at
RBS in London.
He cautioned, however, that risk demand was based more on
"hope than reality".
Market participants were watching Chrysler's last-ditch
efforts to avoid bankruptcy ahead of a government-imposed
restructuring deadline later in the day []. The Wall
Street Journal reported that those efforts had hit a roadblock,
and bankruptcy was "all but certain".
Elsewhere, the New Zealand dollar rose 0.3 percent against
the U.S. dollar to $0.5682 <NZD=>, but it was significantly
outperforming its Australian counterpart after New Zealand's
central bank cut interest rates.
The Reserve Bank of New Zealand cut rates by 50 basis points
to a record low 2.5 percent and pledged to keep them low for
more than a year to fight the country's worst ever recession
[].
The Bank of Japan kept rates unchanged at 0.1 percent and
stood by its forecast for economic recovery by early next year
[].
(Reporting by Jessica Mortimer; additional reporting by
Naomi Tajitsu; editing by Victoria Main)
