TREASURIES-Edge lower in Asia after Fed rate cut, data eyed

By Chikako Mogi

TOKYO, Nov 1 (Reuters) - U.S. Treasuries edged lower in Asia on Thursday after the Federal Reserve lowered interest rates as expected overnight but suggested it may refrain from further easing if the economy holds up.

Treasuries fell on Wednesday after the Fed cut the federal funds rate by a quarter percentage point to 4.5 percent, and said the move "should help forestall" any further deterioration in economic growth.

The Fed said in a statement after the policy meeting that "the upside risks to inflation roughly balance the downside risks to growth," and that it will act as needed to foster price stability and sustainable economic growth.

"The statement was slightly more hawkish than what the market had expected, suggesting that by emphasising both the upside and the downside risks, the Fed wants to avoid the market factoring in successive rate cuts," said a dealer at a Japanese trust bank.

"The Fed wants the market to think the next policy action will depend on data and not market expectations."

The dealer said investors may return to Treasuries, as many players remain wary of the credit market woes.

A Reuters survey taken shortly after the Fed rate cut found that many primary dealers think the current easing cycle has ended or will end with one more quarter-point easing.

Twelve of the 20 primary dealers polled expect the Fed to stand pat at its next policy meeting in December, compared with 10 out of 18 dealers in a previous poll. [FED/R]