* Anxiety about emerging markets remains, with Fed seen on
track for more tapering
* Dollar inches up against yen, holds above Monday's 7-week
By Lisa Twaronite and Masayuki Kitano
TOKYO/SINGAPORE, Jan 28 The dollar regained a
firmer footing against the yen on Tuesday, as expectations the
U.S. Federal Reserve will scale back its stimulus further pulled
the U.S. currency off a seven-week low against its Japanese
While anxiety about emerging markets has increased the
safe-haven appeal of the yen, investors were wary of taking
aggressive positions against the dollar ahead of the Fed's
two-day meeting beginning later in the session.
The U.S. central bank is seen as likely to slice another $10
billion from its bond buying, as they focus more on the
recovering U.S. economy and less on the recent rumbles in
"We expect the Fed taper to continue at a pace of $10
billion per meeting. It is also likely to upgrade its assessment
of the economy, although December's new home sales data show a
weaker rebound in housing demand than was previously thought,"
strategists at Barclays said in a note to clients.
Investors fear the Fed's stimulus withdrawal could pull
funds out of the emerging markets to which it had flowed, at the
same time that tightening credit conditions in China threatens
to sap that country's growth. These twin factors have led to a
risk-asset rout in recent sessions.
Emerging markets currencies remain under pressure, though
most analysts believe a full-blown crisis is unlikely at the
The dollar inched up 0.1 percent to 102.63 yen, after
dropping as low as 101.77 yen on Monday, its lowest since early
One near-term focal point for the market is an emergency
meeting by Turkey's central bank that will be held on Tuesday. A
statement on the outcome is due to be released at 2200 GMT.
The central bank is expected to raise its overnight lending
rate by 225 basis points to 10 percent on Tuesday, according to
the median forecast in a Reuters poll. It was unclear, however,
whether it would be enough to stem a slide in the lira, one of
the focal points in the current turmoil hounding emerging
A rate hike by Turkey's central bank won't provide a
fundamental solution to the lira's woes, which stem from the
country's current account deficit, said Satoshi Okagawa, senior
global markets analyst for Sumitomo Mitsui Banking Corporation
"There will probably be some short-covering, but it's not
something that can be solved just by raising interest rates or
via capital controls," Okagawa said.
Still, an interest rate rise could help support the lira in
the near-term and that in turn could temper risk aversion and
yen-buying pressure in the short term, he added.
The euro was flat against the dollar near $1.3674,
after having touched a three-week high of $1.3740 on Friday.
The Australian dollar edged higher after a measure of
Australian business conditions jumped to its highest in more
than 2-1/2 years in December.
The Aussie dollar rose 0.3 percent to $0.8761,
pulling away from Friday's low of $0.8660, its lowest level
since July 2010.