* Dollar subdued as investors wary of Fed
* Recent data has sparked talk Fed may sound more upbeat
* AUD dips as RBA minutes not as hawkish as market expected
By Kaori Kaneko
TOKYO, Dec 15 (Reuters) - The dollar was subdued on Tuesday, pulling away from recent two-month highs against the euro, with markets wary about what the U.S. Federal Reserve would signal after its two-day policy meeting.
The Australian dollar slipped after minutes of the Australian central bank's December meeting were not as hawkish as the market had expected, dealers said.
But the yen crosses held relatively firm after Dubai got a $10 billion lifeline from Abu Dhabi. That eased some of the concerns about potential debt defaults that had driven investors to the safety of the U.S. dollar and the yen in recent sessions.
"An easing in worries about Dubai debt risk is underpinning cross/yen. On the other hand, persistent concerns about sovereign risk in Europe such as those in Greece and softer stock markets are lending support to the dollar," said Tomohiro Nishida, treasury department manager at Chuo Mitsui Trust and Banking Company.
Under pressure from credit rating agencies and Greece's European Union partners, Greek Prime Minister George Papandreou announced on Monday spending cuts and a 90 percent tax on private bankers' bonuses in an effort to rein in the country's debt.
"Since dollar short-positions had accumulated following the rise of dollar carry trades this year, unwinding of these short-positions is still going on at the year-end," Nishida said.
The Federal Reserve starts its two-day meet on Tuesday and is likely to keep rates unchanged near zero. But all eyes are on the accompanying statement, especially after upbeat sales and jobs data led markets to price in chances of a rate hike in the middle of 2010.
A slew of U.S. data is scheduled to be released on Tuesday, including industrial production for November, the NAHB housing index for December and producer prices for November.
The dollar index was little changed at 76.407, off a 6-week high of 76.726 struck late last week, with analysts expecting it to fall if the Fed reiterates a dovish bias and doesn't fully acknowledge the recent run of strong data.
Although the dollar index has broken up through its 55-day moving average and has had more good than bad sessions of late, it continues to face headwinds, said David Watt, senior currency strategist at RBC Capital Markets.
"If the Fed highlights exit strategies, watch the topside in the dollar index. If they highlight the 'extended period' of low rates, watch the 55-day moving average," he said.
For most of the year, investors sold dollars on signs of U.S. growth because they have been betting that U.S. interest rates would still stay low well into 2010, making other currencies and higher-yielding assets like stocks more attractive.
The dollar index has had a high negative correlation with the S&P 500 index for the past few months on a 90-day rolling basis, meaning it tends to rise when stocks fall and vice versa. That correlation still exists but it has weakened slightly since the end of November as U.S. data has improved and fuelled expectations of higher interest rates.
Both the Australian dollar and the euro/dollar had a high positive correlation with the S&P 500 index at the end of November of above 0.85 on a 90-day basis.
But the euro, under pressure from concerns about sovereign ratings, has seen that correlation fall to about 0.65, while the Australian dollar's remains above 0.71.
The euro eased 0.1 percent to $1.4637 but was up 0.2 percent at 130.15 yen as risk trades got a fillip from the Dubai bailout.
But the upside for yen crosses was also capped by speculation about demand for the yen from foreign investors due to a share sale by Japan's Mitsubishi UFJ Group to raise up to $11.6 billion. The payment due date is next Monday.
The U.S. dollar inched 0.3 percent higher to 88.89 yen, after failing to sustain gains above 89 yen in the wake of Dubai's announcement of its lifeline on Monday.
The Australian dollar was trading at $0.9128, down 0.5 percent on the day after having jumped more than 0.5 percent on Monday.
The RBA minutes said the central bank's decision to raise interest rates this month was "finely balanced" and that the board considered whether to pause in December and wait for its February meeting before moving again. (Additional reporting by Anirban Nag in Sydney and Satomi Noguchi in Tokyo; Editing by Joseph Radford)