* Dollar index soars as risk appetite wanes
* Dollar hits 15-year low vs yen at 84.72 yen
* U.S. 2-yr yields fall after Fed steps to revive economy
* Euro, riskier FX fall as equities lose ground (Updates prices, adds quote)
By Wanfeng Zhou
NEW YORK, Aug 11 (Reuters) - The dollar rallied sharply against most currencies on Wednesday but fell to a 15-year low against the yen as a gloomier outlook from the Federal Reserve and slower Chinese factory growth dented risk appetite.
Both the dollar and yen gained as world stocks fell, prompting investors to flock to safe-haven currencies. But the yen made inroads against the dollar as declining U.S. yields prompted Japanese funds, heavily invested in dollar-denominated Treasuries, to repatriate profits.
Yields on two-year Treasury debt hit a record low after the U.S. central bank said on Tuesday it would use cash from maturing mortgage bonds to buy more government debt to revive a faltering U.S. economic recovery.
"The consensus is that as major economies around the world show reduced growth, this is being perceived negatively for stocks. As stocks go down in value, investors are pulling out and this is proving positive for the U.S. dollar and yen," said Michael Woolfolk, senior currency strategist at BNY Mellon in New York.
The ICE Futures U.S. dollar index, which tracks the greenback versus a basket of six currencies, soared 1.8 percent to 82.223, the biggest one-day percentage rise since October, 2008. It touched a high of 82.394, its strongest since late July.
The euro lost 2.2 percent to $1.2892, the lowest level since late July.
WIN WIN FOR YEN
The dollar dropped to 84.72 yen on electronic trading platform EBS, after taking out option barriers at 85.00 and 84.75, fueled by a narrowing of the spread between U.S. and Japanese two-year yields.
Ashraf Laidi, chief market strategist at CMC Markets in London, said the Fed's "outright Treasuries purchases will likely extend the yen's win-win scenario." Falling U.S. yields will keep Japanese capital at home, while falling stocks will also boost the currency, he said.
Japanese Finance Minister Yoshihiko Noda said on Wednesday that he was closely watching forex markets, but analysts doubted his rhetoric would escalate into currency intervention to weaken the yen.
"Japan needs the support of the U.S. and Europe to intervene, but the Fed and the European Central Bank are focused on other problems right now so I don't think it is possible at these levels," said Manuel Oliveri, currency analyst at UBS in Zurich.
"I see no upside for dollar/yen right now and I can see it falling towards 80 yen," he said.
The record low in dollar/yen was hit in April 1995 around 79.75 yen.
The yen gained across the board, with the euro down more than 2 percent at 110.11 yen and the Aussie losing 1.7 percent.
Adam Cole, currency strategist at RBC Capital Markets, said while concerns about U.S. growth have grown, investors have reacted by selling risk instead of selling the dollar on a view that if the U.S. economy is slowing materially, it will not be in isolation.
"Dollar/yen is really not the big story today, yen crosses are," said Marc Chandler, global head of currency strategy at Brown Brothers Harriman in New York. "The markets are concerned about world growth, not just the U.S."
Elsewhere, sterling fell more than 1 percent against the dollar after the Bank of England said UK inflation would fall well below its 2 percent target in two years even if interest rates stay low. (Additional reporting by Neal Armstrong in London; Editing by Andrea Ricci)