* Dollar index eases, but not far from two-week highs
* Market unwinds USD shorts after no surprises from Fed
* Fed keeps stimulus in place as expected, not too alarmed on growth
* Aussie dollar edges up as Sept building approvals surge
* Kiwi off 6-week low, RBNZ reiterates view for higher rates
By Ian Chua and Masayuki Kitano
SYDNEY/SINGAPORE, Oct 31 (Reuters) - The dollar hovered near a two-week high against a basket of major currencies on Thursday, after extending gains when the Federal Reserve mollified jumpy markets and kept its massive bond-buying stimulus in place.
Some investors had been taking profits on very bearish dollar positions leading up to the Oct 29-30 policy meeting. They continued to do so after the Fed's comments suggested it was less alarmed over the state of the economy than some had anticipated.
The U.S. central bank said it would keep buying $85 billion in assets per month and sounded only slightly less optimistic about growth. However, it dropped a phrase expressing concern about a run-up in borrowing costs, suggesting it was comfortable with interest rates at their current level. ID:nL1N0IK23W]
"The USD's ability to rally simply on lack of new negative news from the Fed adds more evidence to suggest that the market has become uncomfortably short USD," analysts at BNP Paribas wrote in a client note.
The dollar index eased 0.1 percent to 79.704 , but was not too far from Wednesday's post-Fed peak of 79.905, its highest level since Oct 17.
The dollar index has regained some ground after hitting a nine-month trough of 78.998 last Friday, but is down about 0.7 percent for this month.
Against the yen, the dollar eased 0.1 percent on the day to about 98.40 yen, after having touched a two-week high of 98.69 yen on Wednesday.
The euro held steady at $1.3735, down from Wednesday's high of $1.3787.
On Wednesday the euro briefly tested chart support around $1.3695, a level representing the 38.2 percent retracement of its Oct 16-25 rally. Traders said a break there could extend the euro's fall to major and pivotal support at $1.3645/55.
With the Fed meeting out of the way, traders expect the market to go back to watching U.S. economic data before deciding on whether to continue unwinding short dollar positions.
The weekly U.S. jobless claims and the Chicago PMI business barometer report are due later in the day.
In Asia, the outcome of the Bank of Japan policy meeting will be in focus, although the BOJ is expected to maintain its ultra-loose monetary policy. It could also lift its long-term economic forecasts.
"I think basically they (BOJ) would say that they are comfortable with the outlook," said Sim Moh Siong, FX strategist for Bank of Singapore.
"But I think the bigger question is, will they still have the same level of comfort three to six months down the road. Perhaps then there may be a higher possibility of easing if the sales tax hike does impact on the economy," Sim added.
Japan's sales tax is set to rise to 8 percent in April from 5 percent, to cover rising welfare costs.
The Australian dollar rose 0.2 percent to $0.9501, having gained a lift after data showed that Australian building approvals surged 14.4 percent in September, well above market expectations for a 2.7 percent increase.
The New Zealand dollar stood at $0.8259, having pulled away from Wednesday's six-week low of $0.8193 after the Reserve Bank of New Zealand reiterated it was likely to hike interest rates next year.
Traders said some investors were forced to cover short kiwi positions as they had expected the RBNZ to take a more dovish to tone to restrain the local dollar.