Tokyo - The dollar rose in Asia on Wednesday as investors focus on the outcome of a two-day Fed policy meeting with many eyeing a further reduction in the bank's stimulus drive.

In midday Tokyo trade, the dollar fetched 103.16 yen, up from 102.97 yen in New York on Tuesday afternoon.

The euro also rose to 140.87 yen from 140.73 yen in US trade while it weakened to $1.3655 against $1.3667.

A pullback on Fed monetary easing is a plus for the dollar but could exacerbate fears of a capital flight away from emerging markets as dealers look for safer investments.

Global equity and forex markets have been in turmoil since the end of last week after a plunge in the Argentine peso sparked fresh worries about developing nations' economies.

The sell-off in Buenos Aires came on the back of data indicating manufacturing activity in China - a key driver of global growth - had contracted in January.

But Wednesday trade saw easing concern over emerging market sell-offs after Turkey's decision on Tuesday to aggressively raise interest rates to defend the lira. India's central bank also hiked interest rates on Tuesday.

Upbeat US consumer confidence figures which logged a rise for the second consecutive month, also boosted investor sentiment and overshadowed disappointing durable goods orders.

“Calming worries in emerging markets amid supportive actions by some EM (emerging market) central banks, together with a higher-than-expected January consumer confidence in the US, helped an improvement in market tone,” Credit Agricole said.

The Fed last month said it would reduce its bond-buying by $10 billion-a-month from January to $75 billion, citing a pick-up in the world's biggest economy, and markets are widely expecting it to announce a similar-sized cut on Wednesday.

“While a $10bn taper, as we and most market participants expect, could potentially raise concern amid recent worries on EM, the chance is that such actions are already priced in and discounted for during the recent sell-off,” Credit Agricole said.

It added it didn't see any major reaction in the markets with sentiment likely stabilising going forward unless the Fed made a surprise decision.

The meeting also marks the last for Ben Bernanke as Fed chairman.

Janet Yellen, who will become the first woman to chair the bank, takes the top job on February 1. - AFP