Dollar slips after Fed, market awaits ECB meet

By Naomi Tajitsu

LONDON (Reuters) - The dollar slipped on Wednesday, retreating from a seven-week high versus the euro after the Federal Reserve suggested it was in no hurry to raise interest rates, countering some views for a rise in coming months.

The dollar's losses were limited by the continuing slide in oil prices, however, and it hovered near its highest level against the yen in more than a month and a half.

The Fed kept rates at 2 percent as widely expected, with Dallas Fed President Richard Fisher the sole policymaker dissenting in favor of a rate hike, contrary to expectations that one other official might join him.

"The Fed didn't offer a significantly new stance on policy, as some in the market had been expecting, which prompted some selling in the dollar," said Kikuko Takeda, currency economist at BTM UFJ.

"It shows that the euro's slide against the dollar in past sessions may have been overdone."

But she added that oil's retreat from a record high last month was limiting dollar losses, while keeping it boosted versus the yen, given that lower oil prices are considered good news for the United States, the world's largest oil consumer.

With the Fed meeting over, investors awaited Thursday's meeting of the European Central Bank, which is expected to hold rates at 4.25 percent after raising them last month.

The ECB is expected to underline its concern about surging inflation, although a weak economy is seen deterring it from raising rates for the time being.