LONDON, Sept 17: The dollar edged higher against the euro on Wednesday following US Federal Reserve decisions to leave the benchmark US interest rate unchanged and to launch a massive bailout for insurer AIG.

The single European currency in late-day trade was at $1.4120 after $1.4127 late Tuesday in New York.

The US unit fell against the yen, trading at 104.61 against 105.62.

Analysts said the dollar remained under pressure in the aftermath of the Fed moves, notably as a statement accompanying its interest rate decision seemed to herald a possible future softening in monetary policy.

“Financial market strains and risks to growth were upgraded, inflation risks downgraded,” noted experts at Commerzbank.

At French bank BNP, analysts said the Fed move to provide an 85-billion-dollar rescue loan to insurance giant American International Group could support “risk sentiment momentarily.”

In times of crisis, investors often become risk averse regarding weaker currencies, prompting them to seek refuge in the dollar and thereby shore up its value.

But BNP analysts said the Fed bailout could also prove to be negative for the dollar, noting “the need to involve the Fed at such a late stage highlights the extreme systemic overhang risk which should keep investors wary for longer.”

Lee Hardmann of Bank of Tokyo-Mitsubishi said “the improvement in sentiment towards risk assets has been rather tepid, reflecting the fact that financial market tensions remain elevated, as highlighted by abnormally tight inter-bank lending conditions.”—AFP