The dollar fell versus the yen Tuesday in Asia, as Japanese exporters sold the greenback and many players stood on the sidelines ahead of the U.S. Federal Reserve's decision on interest rates later in the day.
The U.S. dollar was trading at 114.88 yen midafternoon, down from 115.17 yen late Monday in New York. The euro fell to US$1.3862 from US$1.3867.
Traders and investors widely expect the Fed to announce a rate cut at its Federal Open Market Committee meeting, but they are split on whether it will be a reduction of 25 or 50 basis points.
"It seems speculation for a 50-basis-point cut was strong last week, but with credit market conditions slightly easing now, a 25-basis-point cut wouldn't come as much of a surprise either," said Akio Shimizu, a senior dealer at Mitsubishi UFJ Trust and Banking Co.
Direction in foreign exchange markets will depend on how U.S. stocks react to the news.
The Bank of Japan's own policy board members are to vote on whether to raise local interest rates Wednesday. Given the continuing financial market turmoil and increasing risks of a downturn in the U.S. and Japan, a BOJ rate hike is highly unlikely, traders said.
Another focus this week will be earnings announcements from major U.S. financial institutions, which should help investors gauge the impact of the subprime mortgage crisis on the financial sector there.
Lehman Brothers' earnings were due out later Tuesday, followed by Morgan Stanley's Wednesday.
Against other regional currencies, the dollar was higher, rising to 930.8 South Korean won from 928.4 the previous day. It also rose to 7.910 Hong Kong dollar from 7.7877.