The dollar hovered within sight of a 15-year low versus the yen on Wednesday after the Federal Reserve announced plans to boost a flagging economy by reinvesting money from maturing mortgage bonds in government debt.

The move did not come as a complete surprise to the market but it marked a policy shift for the Fed, which only a few months ago debated how to start winding down some of its monetary stimulus programmes.

The Fed's pledge to maintain asset purchases and shift to Treasuries does suggest it may boost the size of its already massive $2.3 trillion balance sheet if the economy loses momentum, market players said.

The dollar dipped 0.1 percent from late U.S. trade on Tuesday to 85.37 yen JPY=, edging back toward an eight-month low of 85.02 yen hit on trading platform EBS last week. A drop under November's low of 84.82 yen would take the dollar to a 15-year low.

The dollar could fall below 85.00 yen at any moment, says Shuichi Kanehira, head of FX spot trading at Mizuho Corporate Bank.

Market players cited talk of stop-loss offers in the dollar near 85.00 yen, 84.80 yen and 84.75 yen and large option barriers at 84.75 yen and 84.50 yen, suggesting that the dollar's drop against the yen could gain momentum if such levels are hit.

Given the contrast with the BOJ's decision yesterday, we seem to have entered a situation where the yen is likely to rise, said Akira Hoshino, chief manager for the Bank of Tokyo-Mitsubishi UFJ's foreign exchange trading department.

The U.S. central bank acknowledged economic growth had slowed in recent months and reiterated its intention to hold benchmark interest rates at record lows for an extended time.

(The Fed's) decision should be seen primarily as a signal to financial markets, consumers and businesses that the FOMC is ready to start a second round of quantitative easing if the Committee sees a double dip around the corner, Rabobank analyst Philip Marey said in a research note, referring to the U.S. central bank's policy-setting Federal Open Market Committee.

YEN ON THE RISE

The Bank of Japan kept interest rates steady and held off on new policy steps on Tuesday, saving its limited firepower in case the currency's rise accelerates.

Fears that the yen's rise could accelerate hit Tokyo shares, with the Nikkei share average .N225 sliding more than 2 percent.

The fall in share prices had a feedback effect on the yen, helping to lift it against higher-yielding currencies and other major currencies.

The Australian dollar shed 0.8 percent against the yen to 77.44 yen AUDJPY=R, the euro slid 0.7 percent to 111.85 yen EURJPY=R, and sterling fell 0.6 percent to 134.72 yen GBPJPY=R.

The low-yielding yen is a funding currency for carry trades and tends to rise in times of market stress.

A dollar drop below 84.82 yen could trigger more market speculation about the possibility of Japanese intervention.

Traders think the yen will eventually test those levels as Japan is unlikely to intervene to curb the yen unless dollar/yen falls closer to 80 yen, or its moves become more volatile.

The euro fell 0.6 percent to $1.3099 EUR=, pulling away from last week's three-month peak of $1.3334.

But the euro could be poised to rise in the wake of the Fed's decision and economic assessment, analysts said.

With further policy moves now a clear possibility, the USD will come under pressure beyond the impact of U.S.-Euro area growth divergence alone, analysts at JPMorgan said. (Additional reporting by Wayne Cole in Sydney and Reuters FX analyst Rick Lloyd in Singapore; Editing by Edwina Gibbs)

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