*

Dollar index hit lowest in more than a year

*

Domestic data supports Australian, New Zealand currencies

*

Sterling jumps after BoE

(Updates prices throughout, adds analyst comment)

By Chibuike Oguh and Stefano Rebaudo

NEW YORK, Sept 19 (Reuters) - The U.S. dollar edged

slightly lower in choppy trading on Wednesday as markets

grappled with the supersized 50 basis point interest rate cut as

well as the switch to an easing monetary policy stance delivered

by the Federal Reserve.

Investor expectations had largely shifted towards a dovish

outcome in the days leading up to the Fed's move on Wednesday,

with money markets pricing in around a 65% chance of a 50 basis

point (bp) cut. But economists polled by Reuters were leaning

towards a 25 bp cut.

"The initial interpretation of the decision was that it was

dovish and while it was basically even odds that it was going to

happen, overall, on the surface, it's still a dovish move," said

Eugene Epstein, head of trading & structured products North

America at Moneycorp in Boston.

The dollar index, which measures the greenback

against a basket of six peers, was down 0.069% to 100.950 after

reversing gains made in early trading. It slid to its lowest in

more than a year of 100.21 in the previous session.

The euro strengthened to $1.111950, but remained

below a three-week high hit in the previous session.

Against the yen, the dollar was 0.45% higher at

142.895.

"Everything reversed basically by the end of the day, so you

can make the argument as a bit of buy the rumor, sell the fact.

A lot of dovishness was already priced in," Epstein said.

Money markets priced in 72 bps of additional rate cuts in

2024 and 192 bps by September 2025.

Initial claims for state unemployment benefits dropped

unexpectedly to 12,000 last week, according to Labor Department

data on Thursday, suggesting labor market growth.

Fed policymakers on Wednesday projected the benchmark

interest rate would fall by another half of a percentage point

by the end of this year, a full percentage point next year and

half of a percentage point in 2026.

The pound hit its highest since March 2022 versus the dollar

after the Bank of England's Monetary Policy Committee (MPC)

voted 8-1 to keep rates on hold. Sterling was up 0.30% against

the greenback at $1.32540 after reaching as high as $1.3314

.

The Australian and New Zealand dollars drew support from

domestic data surprises. Australian employment exceeded

forecasts for a third straight month in August.

The Aussie was up 0.56% to $0.68020.

The kiwi, meanwhile, traded 0.42% higher at

$0.62335, after data showed the New Zealand economy contracted

by 0.2% in the second quarter.