* Dollar slips vs yen, not far from 13-year low
* Dollar hit 2-½ month low vs euro
* Fed's historic rate cut seen keeping dollar pressured
By Masayuki Kitano
TOKYO, Dec 17 (Reuters) - The dollar dipped towards 13-year lows against the yen and hit 2-½ month lows versus the euro on Wednesday after the U.S. Federal Reserve slashed interest rates to as low as zero.
In a historic move, the Fed on Tuesday cut its target for the federal funds rate to a range of zero to 0.25 percent, a record low, from 1.0 percent and said it was willing to keep rates low for an extended period.
The Fed said it would use "all available tools" to support the economy, and added that it was mulling possible purchases of longer-term U.S. Treasury debt and would consider other ways to tap its burgeoning balance sheet to support the economy.
"Dollar selling pressure from the standpoint of interest rates seems likely to continue," said Masafumi Yamamoto, head of foreign exchange strategy in Japan for the Royal Bank of Scotland.
The Fed's move brought the policy target for the federal funds rate to below the Bank of Japan's 0.30 percent target for the overnight call rate.
The mix of near zero short-term interest rates and the Fed's willingness to print money to buy various types of assets bodes ill for the dollar, market players said.
In a sign of the dollar's broad weakness, the dollar index, which measures the dollar's value against a basket of major currencies, fell around 0.1 percent to 80.087, inching back towards a 2-½ month low of 79.795 hit on Tuesday.
The dollar dipped 0.3 percent against the yen from late U.S. trading on Tuesday to 88.82 yen, hovering near a 13-year low of 88.10 yen hit on trading platform EBS last week.
Finance Minister Shoichi Nakagawa was quoted by the Nikkei daily as saying he was not considering intervention in currency markets for now, but market players said there was still wariness about the risk of Japan intervening to rein in the yen.
Nakagawa said the yen's recent rise was not bad and that the latest currency moves were not too sharp, the Nikkei said on its website.
The euro hit a 2-½ month high of $1.4192 on EBS earlier. Later the currency eased back to $1.4046.
CHANGING YIELD LANDSCAPE
The euro could rise towards $1.45 by the end of the month, even if the euro zone's economic outlook is not all that bright, said Akira Kato, senior manager for the Bank of Tokyo-Mitsubishi UFJ's foreign exchange trading department.
"When you think about what you would buy after selling the dollar, eyes tend to go towards Europe," Kato said, adding that this was especially true since euro zone interest rates were still higher than those in the United States.
The euro has risen against the dollar this month as investors braced for the Fed to lower interest rates and because European Central Bank policymakers have tried to cool expectations that they would make another big interest rate cut in January.
With the Fed's willing to keep interest rates low level for sometime, the euro and the higher-yielding currencies such as the Australian dollar will likely be bought against the dollar, said Akira Takeuchi, manager at Chuo Mitsui Trust and Banking.
Market players said shrinking yield differentials suggested that dollar could fall further against the yen.
After the Fed's decision, U.S. benchmark 10-year Treasury yields fell to about 2.26 percent the lowest since 1951, according to Global Financial Data.
The yield gap between U.S. and Japanese 10-year bond yields has fallen to below 1 percentage point, the smallest in roughly two decades according to Reuters Ecowin data, and down sharply from roughly 2.5 percentage points in late October.
Such declining yield differentials could make U.S. bond investments seem less attractive to Japanese investors.
"The dollar is likely to fall a bit further if U.S. long-term interest rates fall further," said Takahide Nagasaki, chief foreign exchange strategist for Daiwa Securities SMBC. (Additional reporting by Kaori Kaneko; Editing by Edwina Gibbs)