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FOREX-Dollar rises as Fed's jobs view hints at rate hike

* Dollar bulls seize on Fed's upgraded labor market outlook

* Dollar slips briefly after Fed statement, reverses quickly

* Aussie, other commodities-linked currencies under pressure

* Kiwi holds firm earlier after RBNZ governor comments (Updates throughout, adds quote)

By Richard Leong

NEW YORK, July 29 (Reuters) - The dollar rose modestly against a basket of currencies on Wednesday as the Federal Reserve upgraded its view of the labor market, supporting some traders' opinion that it would raise benchmark U.S. interest rates, perhaps as early as September.

The latest statement from the Federal Open Market Committee, the U.S. central bank's policy-setting group, affirmed the prevalent view that the Fed is ready to end its near-zero interest rate policy by year-end as the world biggest economy has dug out of a recession worsened by the global credit crunch nearly seven years ago.

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Although inflation has remained below the Fed's 2 percent target and overseas developments including the European debt crisis and most recently China's stock market turmoil have complicated the timing of a rate "lift-off," most analysts reckon the era of near-zero rates is coming to an end.

"A September move is definitely in the cards," said Joe O'Leary, senior foreign exchange trader at Silicon Valley Bank in Santa Clara, California.

The consensus among economists in a Reuters poll published on July 23 was that the Fed would raise rates by a quarter point at its September meeting, followed by another quarter-point move in December.

Traders who are bullish on the dollar pointed to the FOMC acknowledgement of "solid job gains" in recent months.

The dollar initially slipped on the statement before quickly reversing back into positive territory.

"The initial move lower for the dollar was a knee-jerk reaction. This statement will likely be seen as a minor step, pointing to a September move as squarely on the table," said Omer Esiner, chief market analyst with Commonwealth Foreign Exchange Inc. in Washington.

The dollar was last up 0.3 percent at 123.91 yen, while the euro was down 0.7 percent at $1.0983.

The dollar index was 0.4 percent higher on the day at 97.159.

Meanwhile, an initial drop in oil prices exerted downward pressure on the Australian dollar and other currencies closely linked to commodities. A rebound in the oil market helped pare losses in those currencies but their sell-off resumed due to the perceived hawkishness of the FOMC statement.

The Australian dollar was last down 0.6 percent at $0.7291 while the New Zealand dollar was down 0.3 percent at $0.6670.

The kiwi held firm earlier after the country's central bank governor played down the chances of more deep rate cuts. (Additional reporting by Patrick Graham in London, Hideyuki Sano in Tokyo and Masayuki Kitano in Singapore; Editing by Meredith Mazzilli and James Dalgleish)