FOREX-Dollar dives versus euro on emergency Fed cut

(Adds details, updates prices)

NEW YORK Jan 22 (Reuters) - The dollar fell sharply against the euro on Tuesday after the Federal Reserve unexpectedly slashed its benchmark overnight lending rate by 75 basis points in a bid to allay market fears about a U.S. recession.

The Fed's emergency move, precipitated by a global equities market rout, has wiped out the dollar's yield advantage over the euro. The Fed funds rate target is now at 3.5 percent.

"Under any other Fed this would not be a surprise, but this Fed has been reluctant to cater to market expectations," said Mark Meadows, currency strategist at Tempus Consulting in Washington. "This should support the euro in the short term, however our long-standing view is still that the U.S. economy will rebound and help the dollar gain into the middle of this year."

The euro traded up 0.8 percent from late Monday at $1.4563 EUR=, after briefly racing to $1.4592 shortly after the Fed's unscheduled announcement. Against the Swiss franc, the dollar was down 0.8 percent to 1.0993 francs CHF=.

Against the yen, the dollar was up 0.3 percent at 106.30 yen, helped by a slight boost in sentiment for U.S. equities.

The Fed's move helped U.S. stock index futures to cut losses, but some analysts said the step was a sign of panic on the part on monetary authorities. (Additional reporting by Nick Olivari) (Reporting by Lucia Mutikani; Editing by Tom Hals)