TOKYO - The dollar drifted lower in Asian trade Thursday after the Federal Reserve said the US economy was stabilizing and it would scale back its massive effort to pump money into the financial system.

Optimism over the economic outlook, however, was tempered by a sharp drop in Shanghai share prices on concerns about a possible tightening of bank lending in China.

The dollar eased to 96.03 yen in Tokyo morning trade from 96.09 in New York late Wednesday. The euro rose to $1.4224 from $1.4191 and to 136.61 yen from 136.38.

The Fed signalled Wednesday that it would keep its super-low interest rates on hold for a while, but gradually end its program of Treasury bond purchases after completing a $300-billion program in October.

The announcement reassured investors that the US economy is clawing its way out of recession, although mounting job losses remain a worry.

Market players were waiting for US data due this week, including July retail sales and consumer prices, to shed more light on prospects for a recovery in the world's largest economy.

"It's likely that the US economy recovers ahead of the eurozone and Japan," predicted NAB Capital strategist John Kyriakopoulos.

Some market watchers expect investors' appetite for risk to strengthen on hopes that the global economy is on the mend, boosting demand for growth-sensitive currencies such as the euro and the Australian dollar.

But the sharp drop in Chinese share prices added a note of caution.

The Shanghai Composite index slid 4.66% on Wednesday on worries "that Chinese economic growth would be crimped by a reining-in of rapid loan growth", Kyriakopoulos said.