* Fed announces new stimulus program * Dollar falls to 7-month low versus yen * Euro hits 4-month high against dollar By Julie Haviv NEW YORK, Sept 13 (Reuters) - The dollar slumped broadly on Thursday, hitting a seven-month low against the yen and a four-month trough versus the euro as the Federal Reserve announced another aggressive stimulus program to bolter the U.S. economy. In a significant shift in monetary policy, the Fed said it would buy $40 billion of mortgage debt per month and will continue to purchase those and other assets until the weak employment picture shows marked improvement. Many market participants expected the Fed to launch a third asset purchase program after the close of a two-day meeting. A new round of bond purchases, known as quantitative easing, or QE, is viewed as negative for the dollar because it is tantamount to printing money and dilutes its value. "I was expecting them to keep it more open-ended, but overall, we're getting QE3," said Omer Esiner, chief market analyst at Commonwealth Foreign Exchange in Washington, D.C. "The knee-jerk reaction to sell the dollar is the correct one," he said. "I do wonder how much lower the dollar can go, though, given that much of this was priced in." Against the yen, the dollar last traded at 77.42 yen, down 0.5 percent on the day, after hitting a low of 77.11, its lowest since Feb. 9. Further falls would put markets on alert for possible intervention by Japanese monetary authorities to stem the rise in the yen, traders said. The euro was last at $1.2954, up 0.4 percent on the day after hitting a peak of $1.2961, its highest since May 10. In its prior two rounds of QE, the Fed bought about $2.3 trillion in bonds to lower long-term interest rates. While lower rates may prod more U.S. business and residential investment, it is seen as dollar-bearish since there is less incentive for foreigners to buy what could be lower-yielding U.S. debt. Fed Chairman Ben Bernanke, at the Fed's annual conference in Jackson Hole, Wyoming, late last month, had stressed the need to bring down the country's stubbornly high jobless rate and said the U.S. central bank would act as needed to spur the recovery. The euro remained firm after Germany's Constitutional Court on Wednesday cleared ratification of the euro zone's permanent rescue fund, paving the way for the European Central Bank to buy bonds of struggling countries in the region. Also helping the euro was the result of elections in the Netherlands, where pro-European parties crushed radical fringe groupings, dispelling concerns that euro-skeptics could gain a power base in one of the euro zone's core states.