Array

TOKYO, Aug 8 (Reuters) The dollar rose against the yen on Wednesday after the Federal Reserve said inflation remains its primary concern, trimming expectations that it might move to cut interest rates.

The Australian dollar rose against the yen and its U.S.

counterpart after the Reserve Bank of Australia raised interest rates to a decade-high 6.50 percent, while the Fed held rates steady at 5.25 percent. Both decisions matched market expectations.

Japanese data showing core machinery orders were weak in June also helped push the Japanese currency lower.

But investors said the Aussie and the dollar may struggle to gain more as players refrain from taking risky positions such as carry trades, in which low-yielding currencies such as the yen are used to fund investment in higher-yielding or risky assets Market players were still cautious about the possibility of widening fallout from a U.S. credit squeeze, and the performance of stocks continues to be a focus for the markets.

''The Fed reiterated its previous views about the economy and did not really change market conditions,'' said Hiroshi Yoshida, a trader at Shinkin Central Bank.

The Fed acknowledged that financial markets have been volatile in recent weeks and credit conditions have become tighter. But the U.S. central bank said in its post-policy meeting statement that the economy was likely to expand at a moderate pace ahead.

The dollar rose 0.10 percent to 118.85 yen and the euro was up 0.20 percent at 163.51 yen The euro edged up 0.07 percent to $1.3753 but stayed near an overnight low of $1.3736 hit on electronic trading platform EBS.

The Australian dollar rose 0.22 percent against the dollar to $0.8567 and jumped 0.32 percent against the yen to 101.87 yen.

Japan's core machinery orders, a highly volatile figure regarded as a leading gauge of capital spending, fell 10.4 percent in June from the previous month, undershooting expectations of a 1.9 percent fall and following a rise of 5.9 percent in May.

The Nikkei share average was up 0.7 percent following a rise on Wall Street on the Fed's comments.

REUTERS SRS VP0600