FOREX-Dollar pressured broadly after bold Fed move

* Dlr hits 2-1/2 mth low vs euro, near 13-year lows vs yen

* Fed's historic rate cut seen keeping dollar weak

* BoJ seen cutting rates later in the week

(Adds quotes, updates prices)

By Veronica Brown

LONDON, Dec 17 (Reuters) - The dollar fell broadly on Wednesday, hitting a 2 1/2-month low against the euro and closing in on a 13-year trough versus the yen after the Federal Reserve slashed interest rates to between zero and 0.25 percent.

The euro climbed as high as $1.4192 according to electronic trading platform EBS in Asian trade, after the Fed said it would use "all available tools" to battle recession after cutting the fed funds rate from 1.0 percent to a record low.

It added that it was mulling possible purchases of longer-term U.S. Treasury debt and would consider other ways to tap its burgeoning balance sheet to stimulate the flagging economy. [ID:nN16593807].

The announcement and statement hastened broad selling in the dollar, helping the euro register a staggering 11 percent gain on the month to date.

"The Fed had an explicit commitment that they will leave interest rates very low for an extended period and that's quite negative for the dollar because of relative interest rates," said Adarsh Sinha, currency strategist at Barclays Capital in London.

"I guess the question now is: is this the beginning of a big move for the dollar, say euro/dollar to $1.60?"

By 1225 GMT, the dollar had fallen 0.3 percent on the day to 88.70 yen , hovering close to a 13-year low of 88.10 yen hit on trading platform EBS last week.

The euro dipped to $1.4065 , but stayed in sight of an earlier two-and-a-half month high of $1.4192 hit on EBS during Asian trade. The dollar fell 0.2 percent against a basket of six major currencies to 80.022 .DXY.

Yen gains versus the U.S. currency helped to push the euro down 0.5 percent to 124.75 yen .

Sterling faced pressure as the argument for more aggressive British interest rate cuts became compelling, with euro/sterling hitting a record high at 92.06 pence . For latest report click on [GBP/].

FOCUS ON BOJ, MOF

The yen has rocketed in recent months as investors unwound carry trades, cutting exposure to riskier and higher-yielding assets as the financial crisis mushroomed.

It rose again as the Fed's move brought U.S. interest rates below the Bank of Japan's target for the overnight call rate -- now at 0.30 percent -- for the first time in well over a decade.

This has increased speculation that the BoJ will cut interest rates to almost zero following its two-day meeting which ends on Friday.

Analysts say Japan's central bank may also follow the Fed into buying commercial paper outright or purchasing asset-backed securities. [ID:nPEK196415].

"With rates in Japan now higher than Fed rates, this puts further downward pressure on dollar/yen," Bank of America G10 currency strategist David Powell said.

"It also increases the possibility that the BoJ will cut rates by 20 basis points on Friday," he added.

Two-thirds of analysts polled by Reuters now expect the BoJ to cut rates this week, and most of them see rates falling to 0.1 percent from the current 0.3 percent. [ID:nT238594].

The yen's gains prompted Naoyuki Shinohara, Japan's top financial diplomat, to declare on Wednesday that rapid movements in currency markets are undesirable [ID:nTKU003256].

Market players say they remain wary about the risk of Japan intervening to rein in the yen's climb, which is hurting the nation's exporters.

(Additional reporting by Jessica Mortimer in London)

(Reporting by Veronica Brown; Editing by Patrick Graham)

source