TOKYO, Sep 19 The dollar hit a 15-year low against a basket of currencies on Wednesday, e

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TOKYO, Sep 19 (Reuters) The dollar hit a 15-year low against a basket of currencies on Wednesday, extending its slide from the previous day after the Federal Reserve surprised markets with a hefty half-point rate cut to help shore up the economy.

The slashing of overnight interest rates to 4.75 percent from 5.25 percent sparked broad dollar selling while boosting stocks and higher-yielding currencies on hopes for a quick U.S. economic recovery.

The New Zealand dollar, which offers the steepest yield of any industrialised country currency, gave up some of its gains after posting its biggest one-day rise in nine years against the dollar following the Fed's move on Tuesday.

The rally in equity markets prompted investors to put on carry trades -- using the low-yielding Japanese currency as a cheap source of funds to buy higher-yielding currencies.

Japan's Nikkei share average jumped more than 2 percent within minutes of the opening, with financial shares getting a boost after earnings from U.S. investment bank Lehman Brothers showed few signs of severe damage from the credit market squeeze.

"The greater-than-expected rate cut sparked a strong relief rally across global credit and risk markets," said currency strategists at RBC Capital Markets in a note to clients.

Later in the day the Bank of Japan is widely expected to keep rates on hold at 0.5 percent after a two-day policy meeting as it looks for any signs of economic damage from the troubles in the United States.

The Fed said the strains in money markets had the potential to intensify the problems in the housing sector and it was acting to limit the adverse impact on the rest of the economy. But the Fed also said it still sees some inflation risks.

A Reuters poll found that most U.S. bond dealers see the Fed cutting rates to 4.5 percent in October but said that level was seen as the likely bottom for the easing cycle. R] The dollar's trade-weighted index inched down to 79.168, its lowest since 1992, and was last little changed at 79.195 The dollar fell 0.25 percent from late U.S. trade to 115.80 yen with traders citing selling by Japanese exporters looking to repatriate overseas earnings.

The euro was slightly weaker at $1.3975 after striking a lifetime high of $1.3989 on electronic trading platform EBS the previous day.

The single European currency dipped 0.3 percent to 161.70 yen after pushing up to a five-week high of 162.56 yen on Tuesday.

REUTERS RC BST0610

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