FOREX-Dollar retreats as post-Fed meeting rally fades

    * Yen hovers near two-month low vs dollar as BOJ stands pat
    * ECB Draghi says monetary policy not proper to fix
imbalances
    * Norway's central bank signals quicker path to rate hike

 (Updates market action, changes dateline, previous LONDON)
    By Richard Leong
    NEW YORK, Sept 21 (Reuters) - The dollar weakened against a
basket of currencies on Thursday, retreating from a more than
two-week peak as bets stoked by the Federal Reserve signalling
it may raise interest rates in December abated.
    The greenback still managed to hit a two-month high versus
the yen after the Bank of Japan as expected stuck with its minus
0.1 rate target and annual bond purchases worth 80 trillion yen
($717.6 billion).
    The U.S. central bank said on Wednesday it would start to
reduce its $4.2 trillion worth of bond holdings that ballooned
through three rounds of quantitative easing.
    Some traders had speculated the Fed led by Chair Janet
Yellen may soften its stance on raising interest rates a third
time in 2017 as inflation has been stuck below its 2 percent
goal and amid signs of weaker business activity in the aftermath
of two hurricanes that hammered two southern U.S. states.
    "People were surprised that Yellen stuck with the script
that weak inflation is transitory so there was some
short-covering," said Paresh Upadhyaya, director of currency
strategy at Amundi Pioneer Asset Management in Boston.
    At 10:55 a.m. (1455 GMT), an index that tracks the dollar
against six currencies was down 0.2 percent at 92.365. It
reached 92.697 on Wednesday, its highest since Sept. 5.
    The greenback firmed against the yen, hitting a
two-month peak at 112.71 yen in overseas trading. It was last up
0.06 percent at 112.28 yen. 
    Interest rates futures implied traders saw a 73 percent
chance the Fed would raise rates at its Dec. 12-13 meeting
, steady from on Wednesday and up from 37 percent a
month earlier, according to CME Group's FedWatch program.
    While traders reassessed the possibility of another U.S.
rate increase, they awaited clues on whether European Central
Bank would slow its bond purchases later this year due to an
improving economy.
    On Thursday, ECB President Mario Draghi said monetary policy
is not an appropriate tool to address financial imbalances but
offered no fresh insight on the central bank's asset purchase
program.
    "Anything he says that doesn't sound dovish, the market will
take it as hawkish," Amundi's Upadhyaya said.
    Norway's crown rose against the dollar and euro after the
country's central bank kept its policy rate unchanged  but said
a rate increase is likely earlier than previously expected.

    The crown was up 0.3 percent at 9.316 per euro and
0.6 percent firmer against the dollar at 7.8167 crowns.
========================================================
    Currency bid prices at 10:55AM (1455 GMT)
 Description      RIC         Last           U.S. Close  Pct Change     YTD Pct     High Bid    Low Bid
                                              Previous                   Change                 
                                              Session                                           
 Euro/Dollar      EUR=        $1.1913        $1.1891     +0.19%         +13.32%     +1.1929     +1.1866
 Dollar/Yen       JPY=        112.3900       112.2100    +0.16%         -3.83%      +112.7100   +112.1400
 Euro/Yen         EURJPY=     133.91         133.43      +0.36%         +8.75%      +134.0500   +133.4300
 Dollar/Swiss     CHF=        0.9729         0.9697      +0.33%         -4.41%      +0.9747     +0.9696
 Sterling/Dollar  GBP=        1.3520         1.3492      +0.21%         +9.60%      +1.3522     +1.3471
 Dollar/Canadian  CAD=        1.2341         1.2319      +0.18%         -8.11%      +1.2367     +1.2323
 Australian/Doll  AUD=        0.7918         0.8031      -1.41%         +9.74%      +0.8036     +0.7918
 ar                                                                                             
 Euro/Swiss       EURCHF=     1.1591         1.1534      +0.49%         +8.16%      +1.1603     +1.1527
 Euro/Sterling    EURGBP=     0.8808         0.8813      -0.06%         +3.40%      +0.8834     +0.8798
 NZ               NZD=        0.7307         0.7355      -0.65%         +5.27%      +0.7363     +0.7299
 Dollar/Dollar                                                                                  
 Dollar/Norway    NOK=        7.8194         7.8634      -0.56%         -9.47%      +7.8836     +7.8058
 Euro/Norway      EURNOK=     9.3153         9.3530      -0.40%         +2.53%      +9.3718     +9.3023
 Dollar/Sweden    SEK=        7.9843         8.0115      -0.19%         -12.33%     +8.0302     +7.9762
 Euro/Sweden      EURSEK=     9.5122         9.5306      -0.19%         -0.71%      +9.5344     +9.5102
 
    
    
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 (Reporting by Ritvik Carvalho and Dhara Ranasinghe in London;
Editing by Meredith Mazzilli)
Our Standards:The Thomson Reuters Trust Principles.
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