* Dollar little changed vs yen, not far from 13-year low
* Dollar pulls up from 2-½ month trough vs euro
* Fed's historic rate cut seen keeping dollar pressured
By Masayuki Kitano
TOKYO, Dec 17 (Reuters) - The dollar hovered near 13-year lows against the yen and 2-½ month lows versus the euro on Wednesday after tumbling the previous day as 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.
U.S. medium- to long-term bond yields are likely to have more room to fall, Yamamoto said, adding that further declines in yield differentials with comparable Japanese bond yields could drag the dollar lower.
After tumbling broadly on Tuesday, the dollar regained some ground and came off troughs hit following the Fed's action.
The dollar was little changed against the yen compared to late U.S. trading on Tuesday at 88.90 yen, having pulled up slightly from a low near 88.60 yen hit on Tuesday.
The dollar was still not far from a 13-year low of 88.10 yen hit on trading platform EBS late last week.
The euro fell 0.2 percent to $1.4074, having retreated from a 2-½ month high of $1.4150 hit on EBS on Tuesday.
With the Fed's policy meeting out of the way, some market players said the euro's rise against the dollar may start to lose some steam.
"The European Central Bank's pace of lowering interest rates is different compared to the United States, but if you ask whether they will stop cutting interest rates, I think there is more room to fall," said Takahide Nagasaki, chief foreign exchange strategist for Daiwa Securities SMBC.
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.
YIELD LANDSCAPE CHANGING
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 differential between U.S. and Japanese 10-year bond yields fell to 0.92 percentage point on Tuesday, 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 Nagasaki at Daiwa Securities SMBC.
"But the situation is different from the panic-like buying of yen that occurred in October due to risk aversion," he said, adding that market reaction to the Fed's rate cut has been positive, judging from the way stock markets have rallied.
The fact that the yen has not rallied across the board this month, even as it hit a 13-year peak against the dollar, may make it harder for Japanese authorities to justify yen-selling intervention and could make them more cautious about doing so, Nagasaki said.
The Nikkei business daily quoted Japanese Finance Minister Shoichi Nakagawa as saying he was not considering foreign exchange intervention for now. Nakagawa added that the yen's recent rise was not bad and that the latest currency moves were not too sharp, the Nikkei said on its website. (Additional reporting by Takeshi Yoshiike; Editing by Hugh Lawson)