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TOKYO - THE dollar was rangebound in Asian trade on Thursday after the Federal Reserve held interest rates steady and gave no sign it is preparing to raise them in the immediate future, dealers said.
They said the US central bank was likely to wait for clearer signs of an economic recovery before moving to raise borrowing costs.
The dollar was changing hands at 107.93 yen ($1.36) in Tokyo morning trade against 107.82 yen in New York late on Wednesday.
The euro was steady at US$1.5665 (S$2.14) while edging up to 169.05 yen from 168.93.
The Federal Open Market Committee (FOMC) decided to leave its key base interest rate unchanged at 2.0 per cent as widely anticipated at the end of a two-day meeting Wednesday.
Analysts said the central bank's accompanying statement stopped short of flagging a rate hike in the near future, but appeared to leave open the possibility of action to curb inflation later in the year.
'The statement is slightly hawkish if you compare it with the one in April. But an interest rate rise in the immediate future seems unlikely,' said Credit Suisse forex strategist Satoru Ogasawara.
'Expectations that the FOMC will raise rates have receded' but the market still sees a good chance of a hike in September, said Mr Ogasawara.
The Fed statement said: 'Although downside risks to growth remain, they appear to have diminished somewhat, and the upside risks to inflation and inflation expectations have increased.'
Economists say the US central bank is in a tight corner as it weighs up concerns about slowing economic growth and growing inflationary pressures.
'It didn't sound like the Fed was planning to pull the trigger on rate hikes in coming months,' said NAB Capital analyst John Kyriakopoulos.
'The Fed will only hike if the economy recovers and this is unlikely over the next few quarters.'
Dealers said the market may lack direction in the near term although economic data including the Bank of Japan's closely watched Tankan survey of business sentiment due next week would be short-term trading pegs.
The Fed decision marked the first pause in a series of aggressive rate cuts since last September to spur growth. Lower US rates have weighed heavily on the dollar against other major currencies. -- AFP
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