* Dollar/yen up on improved investor risk appetite
* Euro gains on Tuesday's surprise rise in German Ifo
* Focus on whether Fed to unveil steps to fight credit crunch
By Rika Otsuka
TOKYO, Jan 28 (Reuters) - The dollar edged up against the yen on Wednesday as an improved appetite for risk prompted investors to dump the safe-haven Japanese currency, while the dollar dipped versus the euro as players awaited the outcome of a Federal Reserve meeting.
The Fed concludes a two-day policy meeting later in the day when the central bank could unveil new steps to ease the credit crunch.
With the benchmark interest rate already near zero, the market is looking for alternative measures, such as the purchasing of long-dated Treasuries.
"Players in the currency market are not sure whether the Fed's decision will have a direct impact on exchange rates as a rate move is not expected," said a forex trader at a Japanese trust bank. "But we will certainly take our cue from reactions in the stock and bond markets."
Japanese and Chinese investors have been big buyers of U.S. government bonds and any shift in their investment stance on Treasuries could affect the dollar.
The dollar was at 89.35 yen, up 0.4 percent from the level in late U.S. trade.
The Japanese government launched on Tuesday a $16.7 billion scheme to buy shares in companies whose future has been threatened by the financial crisis.
The move helped to improve risk appetite among Japanese investors, boosting Tokyo's Nikkei share average nearly 5 percent on Tuesday and sparking buying in the dollar, the euro and sterling against the yen. The euro climbed 0.9 percent to 118.20 yen, while sterling was up 1.0 percent at 126.83 yen.
The European single currency rose 0.6 percent to $1.3244 a day after it rallied on a surprise rise in German's Ifo economic research institute's corporate sentiment data.
Investors were reluctant to buy the dollar in general as data from industry group the Conference Board showed on Tuesday that U.S. consumer confidence was at all-time low this month, while U.S. home prices fell by a record 18.2 percent in the year to November. (Editing by Brent Kininmont)