The dollar crept lower against the yen on Tuesday as investors waited for a Federal Reserve statement that will be scrutinized for any signs of a shift in the central bank's vigilant stance on inflation.

Fed policy-makers are expected to keep rates on hold at 5.25 percent after their one-day meeting on Tuesday. But some are looking for the central bank to acknowledge growing risks to economic growth stemming from problems in the credit markets, raising the chances of a rate cut in coming months. A cut would make dollar-denominated assets less attractive.

Such a shift would likely push the dollar back toward record lows against the euro and could mark a change in tone from recent meetings, where the Fed has emphasized inflation as the predominant risk to its scenario for the economy.

Most analysts, however, are not expecting the Fed to make any major changes to its statement.

We expect that the Fed will acknowledge that they are watching credit markets closely and that short-term growth risks have on the margin deteriorated in recent weeks, but that they still see inflation as the primary long-term concern, Alan Ruskin, chief international strategist at RBS Greenwich Capital, said in a note to clients.

In early New York trade, the euro was down slightly on the day at $1.3782, just over half a cent below a record high touched last month.

The dollar was down 0.3 percent at 118.55 yen but rose against the pound. Sterling was down 0.4 percent at $2.0230, declining for a second straight session.

The yen rose across the board, also climbing by close to 1 percent against the Australian and New Zealand dollars.

In recent weeks the yen has maintained a tight negative correlation with U.S. stock prices, which looked set to open lower ahead of the Fed meeting.

When stock prices are falling, investors tend to buy back yen to unwind investments in risky carry trades, in which they have financed purchases of high-yielding currencies by borrowing cheaply in the Japanese currency.

The dollar has been shoved down to a 15-year low against a basket of major currencies this week as traders speculated that the U.S. credit market's difficulties could prompt the Fed to cut interest rates by as much as half a percentage point by the end of the year.

If the Fed does not validate such a view with a shift in tone on Tuesday, the dollar may rally, some analysts said.

With rate markets now pricing over 30 basis points of easing by year end, there is risk of disappointment if the Fed chooses to stick to its recent inflation-focused script, strategists at UBS wrote in a note to clients.

U.S. productivity grew at an unexpectedly modest pace in the second quarter, while unit labor costs were running at a higher-than-expected level, government data showed on Tuesday.

The data underscores the bind that the Fed is in, analysts said.

The Fed is boxed in because they have to continue to fight inflation, said Boris Schlossberg, senior currency strategist at DailyFX.com. This forces them to not address any of the slowdown of the economy and maintain the inflation-fighting bias.

(Additional reporting by Rachel Breitman)

Inflation