They said a keenly awaited report from the US Treasury that stopped short of branding China a currency manipulator also buoyed the US unit.

The dollar rose to 111.25 yen in Tokyo afternoon trade from 110.51 in late New York trade Wednesday, when it sank to as low as 110.10 at one point, levels last seen on September 14, 2005.

The euro eased to US $ 1.2730 after US $ 1.2783 in New York, coming off a fresh one-year high of US $ 1.2838.

The single European currency firmed to 141.59 yen from 141.26.

The Federal Reserve Wednesday raised interest rates by a quarter percentage point to 5.0 per cent, as expected. Higher rates generally support the US currency.

After an unprecedented 16 straight rate hikes, the Fed also kept its options open in the post-meeting statement about whether it would raise rates again.

Dealers had expected the central bank to flag a pause in the tightening cycle, a move that would narrow the yield differential with Japan and the eurozone if borrowing costs rise there as expected.

"The dollar recouped some of its losses in Tokyo trade after the Fed left open the possibility of more rate hikes although its tone was weak," said Satoshi Okagawa, head of forex trading at Sumitomo Mitsui Banking Corp.

Fed policymakers said that "some further policy firming may yet be needed" but that any decision would depend on economic data.

"Following the statement, market expectations for a rate hike at the June meeting temporarily recovered to 50 per cent," said Athena FX director Takashi Kudo.

Analysts said the dollar rebound may prove short-lived. "We suspect that only an accumulation of stronger economic reports and/or upside inflation surprises will snap the now month-long slide in the US dollar," National Australia Bank (NAB) analysts said in a market note. - AFP