* Dollar sells off vs euro on Fed statement
* Dollar falls below 85 yen
* Aussie at two-year high vs dollar
(Rewrites, adds details; updates prices)
NEW YORK, Sept 21 (Reuters) - The dollar fell sharply against the yen and euro on Tuesday after the Federal Reserve suggested it stood ready to further stimulate the U.S. economy, raising fears it may print more dollars to do so.
The euro surged to a 6-week high against the dollar and broke above its 200-day moving average for the first time since January, suggesting more gains were ahead. The yen powered higher against the greenback as well, breaking through the 85 level for the first time since Japanese authorities intervened to weaken the currency last week.
The Fed statement suggested the U.S. central bank may be preparing to do more to keep unemployment from rising and prices from falling. The sentiment confirmed investors' fears ahead of the meeting.
The Fed made no shift in monetary policy at the end of a one-day meeting, although it expressed greater concern about the sluggish pace of economic growth and uncomfortably low inflation than it had when it last met in August. For more, see: [ID:nN20109053].
"Bottom line, the Fed may have to do more in terms of stimulus before the end of the year, and that is obviously pushing yields lower," said Joe Manimbo, currency trader at Travelex Global Business Payments in Washington. "In turn it makes returns on dollar-denominated assets even less attractive."
In late afternoon trading in New York, the euro was up 1.3 percent at $1.3238 EUR= after climbing as high as 1.3281, its highest since Aug. 9, according to Reuters data.
As long as the euro holds above the $1.3030 area, some technical analysts see its Aug. 6 high of $1.3334 on EBS as an upside target. The high, according to Reuters data that day, was $1.3333.
The euro also breached technical resistance at its 200-day simple moving average.
Long-term moving averages are stronger resistance levels in this instance. Once breached, the new level would become long-term support for the currency.
The 14-day simple moving average crossed the 50-day simple moving average, using Reuters analytics, which is also bullish for the euro in the near term,
"It seems that the U.S. economy is at that point where the Fed is actually closer to easing monetary policy," said Nick Bennenbroek, head of FX strategy at Wells Fargo in New York. "So we have seen the dollar sell off against the euro."
The Fed statement also sent the dollar lower against the yen, at one point pushing it below 85 yen after breaking through stop-loss orders around 85.20.
The dollar was last 0.7 percent lower at 85.09 yen JPY=. It fell to 84.97 yen on EBS JPY=EBS and 84.99 yen on Reuters data.
The dollar has failed to climb above its post-intervention high of 85.94 yen set last Friday on the EBS trading platform, capped by Japanese exporters selling ahead of their half-year book-closing on Sept. 30.
Some analysts do not rule out another push by Japanese authorities to push the greenback above 86 yen. Many had doubted they would let the dollar fall below 85.00.
The dollar index, which measures the greenback's performance against a basket of six currencies, had its worst sell off since July 1. It was last down 1.1 percent at 80.456, the lowest since August 9. .DXY
In other trading, the Australian dollar rose above 95 U.S. cents for the first time since late July 2008 after the country's central bank chief suggested Australian interest rates would rise further. It was last up 0.6 percent at $0.9529 after peaking at 0.9564, according to Reuters data AUD=.
Reuters Insider looks at the outcome of the FOMC meeting link.reuters.com/ruf64p. (Reporting by Nick Olivari; Additional reporting by Gertrude Chavez-Dreyfuss and Vivianne Rodrigues; Editing by Padraic Cassidy)