FOREX-Dollar gains on risk aversion as stock rout spreads

    * Graphic: World FX rates
    * Dollar supported after Fed as stocks swoon
    * Euro hit after ECB member drops rate cut hint
    * Concern about equity short-squeeze unsettles traders

    By Stanley White
    TOKYO, Jan 28 (Reuters) - The dollar extended gains against
most currencies on Thursday as a stock market rout due to
concerns about excessive valuations boosted safe-harbour demand
for the U.S. currency.
    The euro nursed losses after a European Central Bank member
warned that interest rate cuts are possible to curb the common
currency's recent gains.
    The Australian and New Zealand dollars, two currencies
considered a barometer of risk appetite, also fell against their
U.S. counterpart in a sign of waning market confidence.
    Concerns about a short-squeeze among hedge funds, worries
about corporate earnings, and delays in coronavirus vaccinations
have slammed the brakes on a heady rally in global equities,
which could continue to lift the dollar in the short term.
    "Risk aversion supporting the dollar is a healthy correction
after a one-way rise in risk assets," said Masafumi Yamamoto,
chief currency strategist at Mizuho Securities.
    "The base scenario of economic acceleration in the second
half of the year remains in tact. The Aussie will recover but
the euro will struggle."
    The dollar edged up to 104.27 yen following a 0.4%
gain on Wednesday.
    Against the euro, the dollar rose to $1.2092, close
to a one-week high.
    The British pound fell for a second consecutive
session to $1.3664.
    The dollar index edged up to 91.704, adding to a 0.6%
gain on Wednesday.
    Many Asian bourses skidded by more than 1% on Thursday after
 U.S. stocks suffered their biggest one-day percentage drop in
three months on Wednesday.
    In addition to concerns about corporate earnings and the
economic outlook, worries that hedge funds squeezed out of short
positions in GameStop Corp and similar companies will
take profits on other assets also fuelled risk aversion.

    The U.S. Federal Reserve kept monetary policy unchanged as
expected on Wednesday but did signal some concern about the pace
of economic recovery, which some traders said is another
negative factor.
    U.S. gross domestic product data is due later on Thursday to
gauge the strength of the world's largest economy as it
struggles with the coronavirus pandemic.
    The Australian dollar fell to $0.7643, while the
New Zealand dollar slid to $0.7140 as investors sold
currencies with close ties to the global commodities trade to
trim riskier positions.
    Currency bid prices at 9:25AM (0025 GMT)
 Description      RIC         Last           U.S. Close  Pct Change     YTD Pct     High Bid    Low Bid
                                              Previous                   Change                 
 Euro/Dollar                  $1.2092        $1.2114     -0.18%         -1.04%      +1.2110     +1.2090
 Dollar/Yen                   104.2700       104.0900    +0.19%         +0.97%      +104.2950   +104.1500
 Euro/Yen                     126.08         126.07      +0.01%         -0.66%      +126.1300   +126.0000
 Dollar/Swiss                 0.8898         0.8889      +0.12%         +0.60%      +0.8900     +0.8889
 Sterling/Dollar              1.3664         1.3692      -0.21%         +0.01%      +1.3692     +1.3663
 Dollar/Canadian              1.2822         1.2806      +0.13%         +0.70%      +1.2822     +1.2800
 Aussie/Dollar                0.7643         0.7664      -0.27%         -0.65%      +0.7666     +0.7638
 NZ                           0.7140         0.7159      -0.28%         -0.58%      +0.7161     +0.7138
 Dollar/Dollar All spots
Tokyo spots
Europe spots 
Tokyo Forex market info from BOJ

 (Reporting by Stanley White; Editing by Sam Holmes)