* Dollar wallows close to 17-month low against yen
* Fed minutes show members' concern about headwinds to growth
* Aussie lifted by crude oil price recovery
By Lisa Twaronite
TOKYO, April 7 (Reuters) - The dollar wallowed close to a 17-month low against the yen on Thursday, pressured by minutes of the U.S. Federal Reserve's meeting last month that underscored caution about future interest rate hikes.
The dollar edged down about 0.1 percent in early trading to 109.65 yen JPY= after dropping as low as 109.335 overnight, its weakest against its Japanese counterpart since October 2014. The euro inched 0.1 percent lower to 125.09 yen EURJPY= .
Against the greenback, the euro EUR= was slightly higher at $1.1404, within site of a 5-1/2-month high of $1.1438 touched last week.
The dollar index, which tracks the greenback against a basket of six major rivals, stood at 94.400 .DXY after plumbing 94.239 in the previous session, its lowest point since October last year.
Minutes from the Fed's March 15-16 policy meeting suggested that the central bank appears unlikely to raise interest rates before June due to widespread concern among policymakers over their limited ability to counter the blow of a global economic slowdown. minutes showed debate over whether they might hike rates in April with "a number" of them arguing that headwinds to growth would probably persist, and many urging caution about raising rates.
"While the minutes confirm that there is a lot of uncertainty in the Committee about the economic outlook, with risks tilted to the downside, it is clear that hikes are on the agenda of each meeting now," analysts at Rabobank said in a note, maintaining their prediction for two hikes this year, most likely in June and December.
"From this point on, it would require a significant deterioration in the U.S. economic outlook for the FOMC participants to remove more hikes from their anticipated trajectory for 2016," they said.
In contrast with the Fed, Bank of Japan policymakers will likely debate the possibility of easing further at their April 27-28 meeting, as recently downbeat economic data has failed to reinforce their expectations that a moderate economic recovery would lift inflation towards their 2 percent target, sources familiar with BOJ thinking said. decision on whether to ease at the meeting will be a close call, as many BOJ officials are wary of using their limited policy tools again so soon after unveiling their negative interest rate policy on Jan. 29.
As the buoyant yen shrugged off the divergent monetary policy outlook, the dollar got no help from Japanese Prime Minister Shinzo Abe's remarks to the Wall Street Journal this week that countries should avoid seeking to weaken their currencies with "arbitrary intervention." Australian dollar edged up about 0.1 percent to $0.7608 AUD=D4 . It moved back toward a nine-month peak of $0.7723 reached last week, bolstered by an overnight rise in crude oil prices after the U.S. government reported a surprise draw in domestic crude stockpiles versus market expectations for a new record high. O/R
(Editing by Shri Navaratnam)