The dollar teetered toward a 15-year low against the yen on Wednesday after the Federal Reserve gave a more pessimistic assessment of the weakening U.S. economy, while technology plays dragged Asian stocks lower.

Major European stocks <.FTEU3> fell 0.5 percent in early trade, while U.S. Treasury futures hit their highest in 17 months after the Fed announced it would buy more government bonds to help shore up flagging growth.

Markets are still awaiting further details on the Fed plan, buy analysts doubted the amount of the purchases would be large enough to have a substantial simulative impact.

Some market watchers believe the Fed's move could actually fuel more concern about the economy, hurting investors' appetite for riskier assets such as stocks and commodities.

The Fed will take more actions in the future to inject more money into the bank system. You can say that's the second wave of quantitative easing, said Daniel Chan, chief economist and wealth management strategist BWC Capital markets in Hong Kong.

That will be positive for U.S. treasuries market but not positive for global stock markets, he added.

The U.S. central bank said on Tuesday it would reinvest the money from maturing mortgage bonds it holds into government debt to counter recent signs of economic weakness. It left interest rates near zero and renewed its pledge to keep them low for an extended period.

U.S. Treasuries prices rallied, with yields on the benchmark 10-year U.S. Treasury note falling to 2.7416 percent, the lowest in more than four months.

September futures on the 10-year Treasury note rose 8.5/32 to 125-8/32 after hitting a 17-month peak at 125-9/32.

The step marked an important policy shift for the Fed, which only a few months ago debated how to start rolling back some of its emergency stimulus schemes put in place during the global financial crisis.

But the Fed's more somber assessment of the economy added more pressure on the ailing U.S. dollar, which continued to weaken against the yen.

Japan's Nikkei average <.N225> dropped 2.7 percent, as yen strength and worries about weaker demand undermined shares of exporters. Honda Motor Co <7267.T> and Canon Inc <7751.T> both shed 3.3 percent, while Sony Corp <6758.T> fell 2.8 percent.

Worries about a further strengthening in the yen against the dollar grew after the Fed's new steps toward easing policy and with the Bank of Japan maintaining the status quo, said Masaru Hamasaki, a senior strategist at Toyota Asset Management.

The MSCI index of Asia Pacific stocks outside Japan fell 1.5 percent <.MIAPJ0000PUS>, dragged down by tech counters <.MIAPJIT00PUS> after brokerages downgraded their business outlooks for several major U.S. sector bellwethers.

Overnight, the Dow Jones industrial average <.DJI> and the Standard & Poor's 500 Index <.SPX> fell but closed off their lows after the Fed pledged to underpin the recovery. <.N>

But tech companies pressured the Nasdaq, with chipmakers Intel Corp and Advanced Micro Devices Inc falling on analysts' downgrades, while Novell Inc dropped a day after cutting its third-quarter revenue outlook.

Korean shares fell 1.3 percent as Hynix Semiconductor <000660.KS>, the world's No.2 memory chip producer, tumbled nearly 6.2 percent following the selloff in U.S. chipmakers.

Asian traders saw some comfort in fresh data from China, however, which confirmed its strong economic growth was moderating but showed no signs it was in danger of a hard landing.

DOLLAR FALTERS

The dollar dipped a fifth of a percent to 85.32 yen, edging toward an eight-month low of 85.02 yen hit last week. If it slips below November's low of 84.82 yen, it would mark the currency's weakest level in 15 years.

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

The Australian dollar shed 0.9 percent against the yen to 77.35 yen, the euro lost 0.4 percent to 111.75 yen, and sterling fell 0.5 percent to 134.78 yen.

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

Elsewhere, oil fell 66 cents to $79.59 a barrel on demand concerns after data showing a rise in U.S. crude imports overshadowed a deeper-than-expected decline in crude stocks.

Spot gold gained 35 cents to $1,202.20 an ounce after the Fed's move, still below a 3-week high of $1,212.61 hit last week.

(Additional reporting by Aiko Hayashi, Masayuki Kitano and Rika Otsuka in TOKYO; Editing by Kim Coghill)

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