By Hideyuki Sano
TOKYO (Reuters) - Asian shares are likely to fall on Friday after the U.S. Federal Reserve held off on raising interest rates, reviving concerns about global economic weakness.
The dollar was on back foot, having fallen more than 1 percent after the Fed's decision while U.S. bond yields plunged, erasing their sharp rises in the past couple of days.
Nikkei futures traded in Chicago (NIYZ5) pointed to a fall of about 0.9 percent in the Nikkei average (.N225).
Major Wall Street indexes gave up a 1 percent rally to end lower, with the S&P 500 index (.SPX) losing 0.3 percent.
Fed Chair Janet Yellen said the outlook abroad has appeared to become less certain, adding that recent falls in U.S. stock prices and a rise in the value of the dollar already were tightening financial market conditions.
Analysts and traders had been nearly evenly split on whether the central bank would raise rates for the first time in nearly a decade.
"I think today's decision will prove positive for markets in the end. But volatility is likely to remain high as markets, like the Fed, will still have to confirm the U.S. economy is withstanding the adverse impact from the global economy," said Yoshinori Shigemi, global market strategist at JPMorgan Asset Management.
The Fed's fresh economic projections showed 13 of 17 policymakers still foresee raising rates at least once in 2015, though that is down from 15 at the last forecast made in June.
Financial markets, which have constantly forecast a far slower pace of policy tightening than the Fed's projections, were less convinced.
Instruments such as federal fund futures <0#FF:> and overnight indexed swap (USDOIS) are pricing in only about one in two chance of a rate hike by the end of year.
The Fed's decision to keep rates at zero could give some relief to emerging markets, which have long suffered capital outflows on expectation of higher U.S. rates, but trade-reliant Asian economies are likely to remain under pressure as China's economy slows.
As the prospects of higher interest rates down the road had been a major attraction for the dollar, the U.S. currency slipped against many other currencies.
The dollar index (.DXY) fell to 94.360, its lowest level since Aug 26.
The euro jumped to a three-week high of $1.14415 (EUR=) while the British pound also hit a three-week high of $1.5628 (GBP=D4). The yen also edged up 120.12 to the dollar (JPY=) from Thursday's low at 120.995.
Longer-dated U.S. debt yields plunged, with the two-year notes yield dropping to 0.686 percent, returning to its familiar range only a day after it hit a 4 1/2-year high of 0.819 percent.
The 10-year notes yield slipped to 2.192 percent
Commodity prices were also relatively well-supported with U.S. crude futures last trading at $46.83 per barrel, down slightly from Thursday's high of $47.71 but still up almost 5 percent on the week.
Gold hit a two-week high of $1,136 per ounce.
(Editing by Kim Coghill)