FOREX-Dollar edges up as Fed minutes, speakers awaited

(Updates prices, adds quote, byline)

By David McMahon

NEW YORK, April 11 (Reuters) - The dollar crept up against the euro and yen on Wednesday, as the market awaited the minutes of the Federal Reserve's last policy meeting, which may indicate the central bank's prime concern is still inflation.

Meanwhile the yen hit a record low against the euro after the International Monetary Fund said it saw no need for "heavy-handed" action on the yen carry trade, in which investors have been borrowing in yen to finance purchases of higher-yielding currencies such as sterling.

The euro was up 0.3 percent at 160.35 yen after rising as high as 160.40, hitting a record high for the second straight session.

The Fed left benchmark overnight interest rates on hold at 5.25 percent in late March and removed a phrase pointing to further monetary tightening from its statement accompanying that decision. That initially led to a fall in the dollar and reinforced expectations that the Fed is closer to cutting rates to stabilize a housing-led slowdown in the economy.

But the market has since reinterpreted the changes to that statement, and Fed officials have continued to stress that they are keeping a close eye on inflation, implying they are in no hurry to lower rates.

"We suspect the minutes will certainly show a bias towards inflation, which could give the dollar a bit of strength," said David Powell, currency analyst at IDEAglobal in New York.

The minutes of the Fed's monetary policy-setting committee meeting are due to be released at 2 p.m. (1800 GMT.)

The euro was trading down 0.1 percent at $1.3425 in early New York trade, retreating from a 2-year high of $1.3457 struck in the previous session. The dollar was up 0.3 percent against the yen at 119.40 yen.

The yen also hit fresh decade lows against the Australian and New Zealand dollars after the IMF's comments on the yen carry trade.

European officials have complained loudly about the yen's persistent weakness, which they worry gives Japanese exports an advantage. But there have been few signs that the issue will be taken up in earnest at a meeting of the Group of Seven finance ministers and central bankers in Washington on Friday.

Many analysts say yen carry trades are likely to continue after Japan left interest rates unchanged at 0.5 percent this week, the lowest in the industrialized world.

Sterling was up 0.2 percent at $1.9768 on Wednesday, boosted by a newspaper report that the Treasury may allow UK-based firms to repatriate their foreign profits tax-free.

Traders were also awaiting speeches by Fed chairman Ben Bernanke and Richmond Fed President Jeffrey Lacker.

Bernanke is due to speak at 1 p.m. (1700 GMT) on "market discipline and regulation", while Lacker is scheduled to talk at 12:45 p.m. (1645 GMT) on inflation and unemployment.

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