TOKYO: The dollar weakened in Asia Thursday as attention turns to a US Federal Reserve policy meeting while traders grow hopeful of a diplomatic solution to the Syria crisis.
The greenback fetched 99.50 yen in Tokyo midday trade, down from 99.92 yen in New York and well off the levels around 100.50 yen seen on Wednesday in Asia. The euro slipped to 132.55 yen from 133.03 yen while it also bought $1.3318 compared with $1.3314.
With no fresh catalysts, eyes are now on next week's Fed meeting, where policymakers are expected to announce plans to start unwinding the bank's huge stimulus programme.
A pull-back of the $85 billion a month bond-buying scheme -- which keeps US interest rates subdued by keeping US bond yields low-- would mean fewer dollars in the financial system, which in turn would send its value up.
However, last week's worse-than-forecast August jobs report indicated the US economy still needs some support, leading analysts to speculate that the Fed will not be aggressive in its taper.
"US Treasury yields have lost some upside momentum as tapering worries have eased," Credit Agricole said.
"Consequently the (dollar) continues to lose ground and looks vulnerable to further slippage in the days ahead."
However, reports that Japanese Prime Minister Shinzo Abe is ready to go ahead with sales tax increases aimed at bringing down the country's national debt have boosted the chance of more stimulus from that country's central bank, analysts said.
"We expect the yen to fall sharply as the Bank of Japan announces additional monetary stimulus to offset the impact of the substantial fiscal tightening ... if the Abe government presses ahead with the planned doubling of consumption tax," National Australia Bank said.
Investors are also showing an appetite for riskier, higher-yielding currencies as they hope the United States and Russia will reach a deal that will see Syria hand over its chemical weapons and avert an American military.
US Secretary of State John Kerry is due to meet his Russian counterpart in Geneva as the two sides seek a diplomatic solution to the crisis, which was sparked by the Assad regime's alleged use of chemical weapons on its own civilians.
Global equity and currency markets were last month sent into a tailspin on expectations the US would lead a strike, which analysts feared could have led to a wider Middle East conflict.
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