A perturbation approach is used to study the quantum noise of optical solit
ons in an asymmetric fiber Sagnac interferometer (a highly transmissive non
linear optical loop mirror). Analytical expressions for the three second-or
der quadrature correlators are derived and used to predict the amount of de
tectable amplitude squeezing along with the optimum power-splitting ratio o
f the Sagnac interferometer. We find that it is the number-phase correlatio
n owing to the Kerr nonlinearity that is primarily responsible for the obse
rvable noise reduction. The group-velocity dispersion affecting the field i
n the nonsoliton arm of the fiber interferometer is shown to limit the mini
mum achievable Fano factor. (C) 1999 Optical Society of America.