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TOKYO, Sep 20 (Reuters) The dollar inched down against the yen on Wednesday ahead of an expected decision by the Federal Reserve to keep interest rates on hold for a second straight time at a policy meeting.

The dollar was dented in the previous session on a round of weak U S data, but losses were trimmed after a coup in Thailand prompted the Thai baht to stage its largest one-day fall in three years in a flight to the safe-haven US currency.

The ousting of the prime minister by Thai armed forces sparked a decline in several Asian currencies including the yen, rekindling memories of the Asian financial crisis a decade ago.

But traders in Tokyo said market players in Asia were likely to stay on the sidelines as long as the effect on currencies, and the Thai economy, remains up in the air.

''I think the move is going to be limited,'' said the chief trader at a European investment bank in Tokyo. ''Basically the Japanese market doesn't really take it as linked to the dollar/yen.'' The developments in Thailand helped divert attention from US economic figures that undermined the dollar ahead of the Fed meeting on Wednesday.

Data showing a 6 per cent decline in US housing starts and a 0.4 per cent drop in core producer prices, which exclude energy and food costs, bolstered expectations that the Fed will keep rates at 5.25 percent for the rest of the year.

By 0010 GMT, the dollar slipped to 117.55 yen from 117.75 yen in late US trade on Tuesday, when the Japanese currency slipped half a yen from the day's highs on news of the Thai emergency.

The Thai baht was at 37.685 per dollar off the lows near 37.900 touched on Tuesday.

The euro slipped to 149.00 yen from around 149.25 yen, extending the previous session's 0.5 percent loss.

Weak economic data had undermined the euro fairly broadly after Germany's key ZEW survey on investor sentiment hit an eight-year low in September.

The yen also found support after a European official said on Tuesday that markets had yet to digest policy-makers' remarks calling for the Japanese currency to rise against the euro.

The single European currency was little changed at $1.2675.

REUTERS DKS BST0646