NEW YORK — The dollar sputtered Tuesday on the eve of a US decision on monetary policy, while the yen rose sharply on risk aversion after weaker-than-expected economic data from China.

The euro edged up to 1.4150 dollars at 2100 GMT from 1.4135 dollars in New York late on Monday.

The dollar fell to 95.99 yen from 97.17 yen late Monday.

Financial markets were awaiting the outcome of the US Federal Reserve's two-day policy meeting, which kicked off on Tuesday.

The Federal Open Market Committee (FOMC) gathering is widely anticipated to hold its key federal funds rate unchanged at a historically low range of zero to 0.25 percent to spur lending and economic activity.

Investors are watching to see whether it will give any hints about how long it will continue its highly stimulative monetary policy.

Although the dollar has been weakened by low rates, some analysts say this will not continue indefinitely.

"Long-term expectations for higher interest rates could drive demand for the dollar as market participants anticipate the central bank to tighten policy over the next 12 months," said David Song at Forex Capital Markets.

The dollar had jumped in value last Friday on news that the US unemployment rate fell to 9.4 percent in July as job losses in the month narrowed to 247,000.

The better-than-expected numbers sparked hope of an end to the deep US recession.

"The expected better performance of the US economy against that of the eurozone therefore is one of our most important arguments supporting our expectation of a dollar appreciation," said Commerzbank analyst Ulrich Leuchtmann.

Jon Gencher at BMO Capital Markets said that "the market still seems to be in the midst of a consolidative phase ahead of tomorrow's FOMC rate decision."

But he argued that "in the short term it looks as though the market's bias is to take the dollar higher."

"Although the dollar got a real boost on the back of Friday?s employment data the impetus for the next move doesn't appear to be coming from dollar strength, but more potential weakness in some of the other majors," Gencher added.

In Asia on Tuesday, a slew of Chinese economic figures disappointed markets, supporting the safe-haven yen and also pressuring risky currencies such as the commodity-linked Australian dollar, dealers said.

China's industrial output expanded 10.8 percent in July from a year earlier, official figures showed, but the market had expected a sharper rise.

Exports fell 23 percent on the year and consumer prices continued to drop, according to the data.

"Risk aversion and safe haven are still dominating currency moves in Asia," said Antonio Febres at PNC Bank.

Traders gave a muted response after the Bank of Japan kept its key interest rate steady at 0.1 percent as it wrapped up a two-day monetary policy meeting.

In late New York trade, the dollar stood at 1.0815 Swiss francs from 1.0851 Monday.

The pound was at 1.6478 dollars after 1.6467.