Dollar falls versus euro after Fed meeting minutes

Traders in the Eurodollar options pit at the Chicago Board of Trade signal orders, shortly after the Federal Reserve's decision to leave short-term interest rates untouched between zero and 0.25 percent, in Chicago December 16, 2009.

NEW YORK (Reuters) - The dollar fell against the euro on Wednesday after minutes from the U.S. Federal Reserve's latest policy meeting suggested the possibility of more stimulus measures for the economy.

The dollar also pared gains versus the yen, although it remained higher on the day. The yen has been pressured by uncertainty surrounding the resignation of Japan's finance minister.

Over the past month, the dollar had risen on expectations an improving economy would prompt the Fed to hike interest rates sooner rather than later -- a move that would boost the value of dollar-based assets.

Analysts said Wednesday's Fed minutes are likely to dampen speculation the central bank would tighten anytime soon.

In the minutes, members of the Fed expressed concern the winding down of the central bank's massive purchases of mortgage securities, among other factors, could snuff out a fragile housing market recovery.

Fed officials expect unemployment to remain high for "quite some time" and some said persistently high unemployment might make it desirable at some point to expand or extend large-scale purchases of assets, according to the minutes.

"The Fed headline discussing the possibility of more stimulus for the U.S. economy was surprising and has caused the dollar to weaken especially against the euro," said Amelia Bourdeau, senior currency strategist at UBS in Stamford, Connecticut. "What that suggests is that the U.S. economy is not out of the woods yet."

The euro rose to a session high of $1.4434, according to Reuters data, and was last up 0.5 percent at $1.4432.

The dollar rose 0.7 percent to 92.34 yen, off a high of 92.74 yen hit earlier in the day.

Major currencies are likely to trade in ranges ahead of a key U.S. jobs report on Friday, which could help shape the outlook for U.S. interest rates and the direction of the dollar.

Economists on average forecast U.S. job losses of 8,000 for last month, according to a Reuters poll.

(Additional reporting by Gertrude Chavez-Dreyfuss; Editing by Andrew Hay)