Dollar eases in Asian trade

The dollar eased in Asian trade on Wednesday as the markets waited for the close of a US Federal Reserve meeting for clues on the outlook for interest rates, dealers said.

The dollar eased to 107.73 yen in Tokyo morning trade from 107.83 in New York late Tuesday.

The euro edged up to 1.5570 dollars from 1.5565 but slipped to 167.71 yen from 167.83.

Markets were on tenterhooks for clues on the direction of US interest rates as the Federal Open Market Committee (FOMC) was to wrap up its two-day meeting later in the day and issue a statement.

Market watchers expect the US central bank to keep its rates on hold at 2.0 percent after gloomy data on the world's largest economy, but the focus was on what the Fed will do in the future.

The Conference Board, a business research firm, on Tuesday said US consumer confidence plunged to its lowest in June amid growing concerns about jobs, the economy and higher fuel prices.

At the same time, home prices in some US cities tumbled at a record rate as the woes of the property market showed few signs of abating.

"Everyone expects the Fed will keep rates steady... so the key for the dollar is whether the central bank's statement raises or lowers the likelihood of interest rate hikes in coming months," NAB Capital said in a note to clients.

"Traders price an 87 percent chance that the Fed hikes rates by 25 basis points on September 16," the next Fed meeting after one in August, it said.

The statement released after the meeting is expected to focus in part on inflation, which has been a growing concern for Fed chairman Ben Bernanke as well as the European Central Bank.

Dealers will watch to see the balance between concerns over inflation -- which could signal a desire to raise rates -- and the housing woes, which have led to a credit crunch.

But some analysts questioned the effects of a tighter monetary policy as there are still fears that the US economy could slip into recession.

"The Fed slashed rates nine times but the effects were not visible," said Daisuke Uno, chief strategist at Sumitomo Mitsui Banking Corporation. "Bernanke's Fed has undone all its efforts to shore up economic conditions through a loose monetary policy by shifting full-scale to a hawkish tone to beat inflation," he said.