* USD index holds near a two-week high following rally
* Fed says can start to slow stimulus this year, recovery on track
* U.S. Treasury yields soar, 10-year nearing big chart levels
* China PMI data next in focus, Asian currencies pressured
By Ian Chua
SYDNEY, June 20 (Reuters) - The U.S. dollar held firm in Asia on Thursday, having posted its best one-day gain in over a month after the Federal Reserve confirmed that it would begin to dial down stimulus this year if the economy continued to recover as it expected.
The dollar index, which tracks the greenback’s performance against a basket of major currencies, was flat at 81.414, having jumped around 1 percent to 81.501.
The euro swiftly retreated from a four-month high around $1.3418 to last stand at $1.3282.
Commodity currencies were among the hardest hit with the Australian dollar slumping to a fresh 33-month trough of $0.9260 . It was last at $0.9284, with initial support seen near$0.9223, the August 2010 high.
All eyes will be on emerging market currencies in Asia which could come under renewed pressure as investors unwind carry trades funded in U.S. dollars.
Traders said the Aussie and Asian currencies could come under even more pressure if a report on China’s factory activity, due at 0145 GMT, provided fresh evidence of weakness in Asia’s economic powerhouse.
“Given the market’s growing fears over a hard landing for the Chinese economy, a particularly weak number could add to the post-FOMC selling pressure on the emerging currencies as well as the commodity bloc currencies,” analysts at BNP Paribas wrote in a note.
Dashing hopes for a more dovish stance, Bernanke said the U.S. economy was expanding strongly enough for the central bank to begin slowing the pace of its bond-buying stimulus later this year.
That sent U.S. stocks and bond prices sharply lower, pushing benchmark Treasury yields to a 15-month high. The 10-year yield jumped to 2.37 percent, approaching its March 2012 peak of 2.399 percent and the October 2011 high of 2.420 percent.
A break there could propel yields sharply higher, underpinning the U.S. dollar but perhaps also threatening the U.S. recovery.
Traders said the market’s reaction suggested that investors could be less optimistic about the outlook on the U.S. economy than the Fed and believe any move to scale back support this year could be premature.
Against the yen, the dollar rose 0.2 percent to 96.65 , well up from this month’s low of 93.75. The euro managed to gain against the Japanese currency as well, rising 0.2 percent to 128.47 and pulling away from the June trough of 124.94.
The New Zealand dollar saw a bit of action in early trade, falling about a quarter of a U.S. cent after economic growth at home disappointed.
It hit a near two-week low around $0.7842 after a closely watched report showed the economy grew only 0.3 percent in the first quarter, half of what was expected.
The kiwi remained vulnerable to testing a one-year low of $0.7761 set earlier in the month.