* Fed updates economic view, supporting dlr
* But affirmation of low rates caps gains
* Year-end dlr-short covering may be in final stages -trader
By Satomi Noguchi
TOKYO, Dec 17 (Reuters) - The dollar was steady against the yen on Thursday, holding firm just below the previous day's high hit after the Federal Reserve voiced some optimism about a stabilising economy.
The dollar kept broad its strength, staying close to an over two-month high against the euro, after the Fed reminded markets that it will let most of its special liquidity facilities expire by early next year.
But the greenback's gains were capped after the Fed also reaffirmed that interest rates would remain low for an extended period, as expected.
Traders said the dollar's rise was slowing because investors were close to finishing their dollar-short covering before the year-end.
"There is an impression that the market for the weak dollar is coming to an end, especially after seeing a raft of better-than-expected economic data," said Shuichi Kanehira, head of forex spot trading at Mizuho Corporate Bank.
"But it is probably too early to say the U.S. economy is on a path towards stable recovery, and I see dollar-selling remaining a dominant play into the first half of next year," Kanehira said.
The dollar edged up 0.1 percent from late New York trade to 89.86 yen, after coming off a post-Fed high of 89.99 yen on trading platform EBS. It was also below a one-month high of 90.78 yen touched earlier this month, with expectations there will be a lot of offers from Japanese exporters above 90 yen.
The euro was little changed at $1.4528, staying above a 2-1/2-month low of $1.4503 hit on Tuesday.
Sentiment towards the euro remained sour after Standard & Poor's cut Greece's credit ratings by one notch on Wednesday, traders said, but the impact was largely contained after initial negative reactions to a downgrade by Fitch Ratings last week. (Editing by Joseph Radford)