TOKYO -- The dollar held up close to the key 100-yen level in Asian trade Wednesday after getting a boost from the Federal Reserve's latest interest rate cut aimed at easing market turmoil, dealers said.

But they said it was too soon to say if the greenback was in recovery mode following its plunge to a record low against the euro and a 12-year trough versus the yen earlier in the week.

The dollar was at 99.84 yen in Tokyo morning trade, after rising as high as 100.45.
The greenback surged on Tuesday to 99.72 yen in late New York trade, sharply higher than Monday's low of 95.75, which was the weakest seen 1995.

The dollar remained firm after rebounding overseas in response to the Fed decision, said Naomi Fink, market analyst at Bank of Tokyo-Mitsubishi UFJ.

"But it's too early to predict if the dollar will reverse its downturn. The dollar is still vulnerable to selling pressure if other financial institutions report bad results," she said.

The euro rose to $1.5670, up from $1.5626 in late US trade but down sharply from Monday's lifetime high of $1.5905. The euro gained to 156.30 yen after 155.92.

The dollar rebounded after the Fed lowered its base federal funds rate by three-quarters of a point to 2.25 percent in a bid to ease a growing credit crisis that is threatening to freeze up financial markets.

The Federal Open Market Committee (FOMC) said in a statement it was divided, voting 8-2 in favor of the Fed rate cut, with the two dissenting governors favoring "less aggressive action."

Markets had been pricing in the likelihood of a full percentage point cut to inject more liquidity into the financial system, which is battling a credit crunch related to the US housing downturn.

Lower interest rates are usually seen as negative for a currency because investors prefer assets that offer higher yields.

The Fed also trimmed by 75 basis points its discount rate for direct loans to banks, and some securities firms, bringing the rate to 2.50 percent after cutting a quarter-point off in an unusual Sunday move.

Positive dollar sentiment was also backed by better-than-expected earnings results from US investment banks Lehman Brothers and Goldman Sachs that eased fears of fresh victims from the credit market turmoil.

But the greenback's rebound was capped by lingering uncertainty about the credit crisis, said Chuo Mitsui Trust & Banking forex dealer Yosuke Hosokawa.

"It is true that the results from the investment banks were not so bad as the market had feared, but these results still showed that the bad debt problem continued to weigh on their profits," Hosokawa said.

The market largely ignored a political stalemate over the next Japanese central bank chief after the opposition signalled its disapproval of the latest nominee put forward by the government.

With outgoing Bank of Japan governor Toshihiko Fukui due to step down on Wednesday night, it seems almost certain that there will be a temporary vacancy at the top of the central bank.

"In the long run, it's not good for Japanese assets," Fink said. "The expected vacancy would make investors think that Japan has no leadership in monetary policies and damage trust in the financial markets."