FOREX-U.S. dollar zigzags on Fed bond buying policy, Bitcoin smashes $20,000 barrier

 (Adds details about Fed meeting, updates comments and prices)
    * Graphic: World FX rates in 2020

    By Suzanne Barlyn
    Dec 16 (Reuters) - The U.S. dollar zigzagged to a session high and back on Wednesday after the Federal
Reserve disappointed investors expecting a shift toward more purchases of longer-dated bonds, while
investors kept their focus on Bitcoin, which smashed through $20,000 for the first time. 
    The U.S. dollar index rose to 90.713 after the Fed's rate-setting committee on Wednesday said
its monthly government bond purchase program will continue until the economy substantially improves.

    But the dollar soon gave back the increase, again hovering near a two-year low. The dollar index was
last at 90.2970, down 0.20%.
    "I think so much of it is about what the Fed didn’t do, specifically extending the maturity of the
purchases or the pace of the purchases, and there were obviously some who had expected they would do
that," said Erik Nelson, a macro strategist at Wells Fargo in New York.
    The policy sends a signal that the Fed is comfortable with some increases in longer-term U.S. yields,
Nelson said. "I’m not sure markets were fully aware of that," he said.
    Investors earlier on Wednesday were largely focused on Bitcoin, which has gained more than 170% this
year, buoyed by demand from larger investors attracted to its potential for quick gains, purported
inflation-resistant qualities, and expectations it will become a mainstream payment method.
    Bitcoin was up 7.15% on the day to $20,824.
    One impetus for the rise is that “it is starting to get a wider and more respectable client base, more
businesses and more of the larger investors, so that makes it maybe more sustainable,” said Lou Brien, a
market strategist at DRW Trading in Chicago. That said, “it’s not going to be without its hiccups along
the way.”
    Wall Street remained mixed after the Fed's announcement, with the Nasdaq hitting a record high
as investors awaited a potential fiscal economic stimulus package and the Fed repeated a pledge to keep
its benchmark interest rate near zero.
    Investors continue to eye progress with COVID-19 vaccine distribution. 
    U.S. officials are working with Pfizer Inc to help maximize production capacity after the
drugmaker told them it may be facing production challenges, U.S. Secretary of Health and Human Services
Alex Azar said on Wednesday.
    The Swiss franc earlier on Wednesday touched a six-year high after the U.S. Treasury labeled
Switzerland a currency manipulator.
    The Treasury said that through June 2020 both Switzerland and Vietnam had intervened in currency
markets to prevent effective balance of payments adjustments, a move that investors shrugged off.

    The Swiss franc was last at 0.8856, with the dollar down 0.02% against the currency on the day,
while the Vietnamese dong was last at 23,126, little changed on the day.
    Strong euro zone survey figures and hopes of progress on Brexit negotiations pushed the euro above
$1.2212 against the U.S. dollar on Wednesday for the first time since April 2018, but later notched
    Against the U.S. dollar, the euro was last at $1.2186, up 0.29%. 
    Currency bid prices at 3:23PM (2023 GMT)
 Description      RIC         Last           U.S. Close  Pct Change     YTD Pct     High Bid    Low Bid
                                              Previous                   Change                 
 Dollar index                 90.2970        90.4790     -0.20%         +0.00%      +90.7130    +90.1260
 Euro/Dollar                  $1.2186        $1.2151     +0.29%         +8.70%      +$1.2212    +$1.2125
 Dollar/Yen                   103.4700       103.6550    +0.00%         -4.56%      +103.9100   +103.2650
 Euro/Yen                     126.09         125.95      +0.11%         +3.39%      +126.3400   +125.7200
 Dollar/Swiss                 0.8856         0.8855      +0.02%         -8.47%      +0.8891     +0.8826
 Sterling/Dollar              $1.3489        $1.3470     +0.16%         +1.73%      +$1.3553    +$1.3436
 Dollar/Canadian              1.2743         1.2698      +0.36%         -1.90%      +1.2789     +1.2697
 Aussie/Dollar                $0.7572        $0.7556     +0.21%         +7.91%      +$0.7578    +$0.7539
 Euro/Swiss                   1.0792         1.0759      +0.31%         -0.55%      +1.0806     +1.0762
 Euro/Sterling                0.9032         0.9022      +0.11%         +6.84%      +0.9054     +0.8994
 NZ                           $0.7098        $0.7091     +0.08%         +5.47%      +$0.7120    +$0.7056
 Dollar/Norway                8.6730         8.7145      -0.17%         -0.82%      +8.7325     +8.6540
 Euro/Norway                  10.5700        10.5884     -0.17%         +7.44%      +10.6225    +10.5627
 Dollar/Sweden                8.3550         8.3682      -0.02%         -10.62%     +8.4051     +8.3289
 Euro/Sweden                  10.1827        10.1848     -0.02%         -2.74%      +10.2043    +10.1680

 (Reporting by Suzanne Barlyn
Additional reporting by Karen Brettell
Editing by Jonathan Oatis)