* Graphic: World FX rates in 2019 tmsnrt.rs/2egbfVh
By Saikat Chatterjee
LONDON, March 23 (Reuters) - The U.S. dollar fell back towards the day's lows against its rivals on Monday after the Federal Reserve said it would begin backstopping a wider range of credit, a move that fuelled a rally in risky currencies including the Australian dollar.
After already aggressively easing monetary policy this month, including sending interest rates to near zero, the U.S. central bank said it would now lend against student loans and credit card loans as well as buy bonds of larger employers.
The move yanked commodity-focused currencies such as the Australian dollar from the day's lows into positive territory and pushed the U.S. dollar back down 0.5% against its rivals in volatile trading.
"Risk rallied and took the major currencies with it following the Fed announcement of their support package, although it did not take long for fresh selling to cap the equity rally," said John Marley, a senior FX consultant at FX risk management specialist SmartCurrencyBusiness.
The euro extended its gains and was up 0.7% at $1.07825 while the Australian dollar rebounded more than 1% from the day's lows to $0.58305, up 0.4% on the day.
"There's no doubting that the Fed is doing everything within its power to see the economy through this period of unbelievable turmoil," said Craig Erlam, a senior market analyst at Oanda Europe.
The whipsaw moves in currency markets in afternoon London trading saw expected price swings in the currency markets hit new highs with implied volatility on one-month euro/dollar options rising to a 2011 high.
Earlier, a 9% rally by the dollar over the past two weeks looked set to continue on Monday as a collapse in stock markets raised concerns that central bank actions were not enough.
The U.S. currency's earlier rise was also fuelled by a turnaround in dollar positions among hedge funds to a net short from an overall long bet, according to latest positioning data. That raised speculation that the dollar's rally could be partly explained by short-covering by traders.
Reporting by Saikat Chatterjee; Editing by Larry King and Pravin Char