The dollar eased versus the yen on Wednesday but held above a recent two-week low as investors awaited hints from the U.S. Federal Reserve on the timing and pace of future interest rate increases. Ahead of the Fed's policy statement due at 1800 GMT (2 a.m. EDT), trading could be swayed by month-end related flows, with Wednesday being the last trading day for settlement before the month end, traders said. The dollar eased 0.1 percent to 123.49 yen JPY=, but still held above a two-week low of 123.01 yen set on Monday. Against a basket of major currencies, the dollar last traded at 96.648 .DXY =USD. The greenback had set a two-week low at 96.288 on Monday but has since pulled up from that trough. "We expect the Fed to refrain from a clear indication on the timing of the Fed's rate hike. We still expect a hike in September," said Tohru Sasaki, the head of forex research at JPMorgan Chase Bank in Tokyo. Sasaki also said the dollar/yen is unlikely to move much if the Fed does steer clear of dropping clear hints on its rate hikes, noting that dollar/yen has not shown any big reaction to the Fed' policy statement this year. The euro held steady at $1.1060 EUR=, trading below Monday's two-week high of $1.11295. Worries about the Fed's draining of cheap funding have been weighing on commodities and emerging market assets that had benefited in recent years from the Fed's money-printing. Many commodity currencies remained under pressure from worries about slowdown in the Chinese economy as well, though they bounced back from multi-year lows thanks in part to hopes Chinese shares are stabilizing after their massive fall on Monday. The Australian dollar eased 0.2 percent to $0.7322 AUD=D4. On Tuesday it had set a six-year low of $0.7257. The New Zealand dollar, worst-performing of the major currencies so far this year, edged higher after comments from the Reserve Bank of New Zealand were perceived to contain no new surprises. RBNZ Governor Graeme Wheeler said the economy needed further rate cuts and a lower exchange rate. He added that local forecasts of further large rate cuts "could only be consistent with the economy moving into recession". The kiwi rose to as high as $0.6739, its two-week high, following Wheeler's comments. It last traded at $0.6704 NZD=D3, up 0.2 percent from late U.S. trade on Tuesday. "The RBNZ is still clearly jawboning the currency lower, and thus we might expect a relatively limited further bounce in the NZD," Greg Gibbs, head of Asia Pacific markets strategy for RBS in Singapore, said in a research note. Still, a further near-term bounce in the New Zealand dollar could not be ruled out, Gibbs said. The New Zealand dollar hit a six-year low of $0.6498 earlier this month, having fallen 16.7 percent from the end of last year.
