(Updates prices, add quotes)

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Dollar falls as Fed projects three rate cuts in 2024

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Stocks extend gains after Fed's announcement

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Yen hovers near 4-month low a day after BOJ ends negative

rates

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Benchmark bond yields dip from recent peaks

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Oil weakens, gold sags from record high

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Graphic: World FX rates http://tmsnrt.rs/2egbfVh

By Koh Gui Qing and Marc Jones

NEW YORK/LONDON, March 20 (Reuters) - World stocks

jumped on Wednesday and the dollar snapped a winning streak,

after the Federal Reserve indicated that it still expects to cut

U.S. interest rates three times this year despite projecting

slightly slower progress on inflation.

Fed Chair Jerome Powell said recent high inflation readings

had not changed the underlying story of slowly easing price

pressures, but added that recent data also had not bolstered the

central bank's confidence the inflation battle had been won.

Equity investors nonetheless cheered the Fed did not dial

back the number of rate cuts that it projects. MSCI's gauge of

stocks across the globe climbed 0.61% to hit a

record high, as stocks on Wall Street extended gains following

the Fed's announcement.

The Dow Jones Industrial Average jumped 1.03%, the

S&P 500 added 0.89%, and the Nasdaq Composite

leapt 1.25%.

"The market is relieved that the Fed is still projecting

three rate cuts this year," said Irene Tunkel, chief U.S. equity

strategist at BCA Research in Florida.

"Recent too-hot inflation readings have not derailed the

Fed's plan so far. This is a 'no-harm-done' outcome."

The prospect of rate reductions weighed on Treasury yields.

The 2-year note slid 7.9 basis points to yield

4.6129%. Benchmark 10-year notes were down 1.5 basis

points at 4.281%.

"The most interesting thing, though, is that they

significantly increased their GDP projections for not only 2024,

which they sort of had to do given how the data has been coming

in, but also for 2025 and 2026," said Ellen Hazen, chief market

strategist at F.L.Putnam Investment Management in Massachusetts.

It "says to me that they are increasingly believing that

they do not need to see a recession in order to achieve the soft

landing," she added.

The dollar reversed into losses after the Fed's meeting. The

dollar index fell 0.433%, and a softer dollar helped the

Japanese yen claw back some losses. It was down 0.30%

versus the greenback at 151.29 per dollar, off a four-month low

of 151.82 hit earlier on Wednesday.

The yen has been struggling since the Bank of Japan raised

rates for the first time in 17 years this week, a move that

traders believe will keep the yield differential between

Treasuries and Japanese government bonds wide enough to sustain

selling pressure on the yen.

FED AHEAD

The pan-European STOXX 600 index was unchanged for

the day, although shares of Kering, the maker of

luxury Gucci goods, tumbled after a hefty profit warning.

Tokyo's Nikkei was closed for a holiday in Japan on

Wednesday, while MSCI's broadest index of Asia-Pacific shares

outside Japan finished flat although Seoul

jumped 1.3%, driven by a 5.6% surge in Samsung's share

price after Nvidia ( NVDA ) said it was qualifying

the South Korean chipmaker's high bandwidth memory (HBM) chips.

Chinese shares closed fractionally higher after the central

bank there left benchmark lending rates unchanged, as widely

expected. The Shanghai Composite gained 0.5%, while Hong

Kong's Hang Seng index crept up 0.2%.

Top European Central Bank rate setters have endorsed June as

the likely month to start its cuts, and some would like as many

as four this year.

"Our decisions will have to remain data-dependent and

meeting-by-meeting," ECB President Christine Lagarde told a

conference in Frankfurt on Wednesday. "This implies that, even

after the first rate cut, we cannot pre-commit to a particular

rate path."

The euro gained on the dollar by the end of the day, up

0.51% at $1.092.

Oil prices retreated from multi-month highs, however, due to

recent gains in the dollar. Brent fell 1.95% to $81.68

per barrel, and gold prices 2,185.69 an ounce, some

distance away from this month's record high of $2,194.99.