(Updates prices, adds comments; changes byline, dateline, pvs LONDON)
* Fed expected to hike at two-day meeting beginning Tuesday
* Market worried Fed may hint at concern over dollar gains
* Oil price rally lifts Canadian dollar, Aussie dollar
* Dollar eases from 10-month high vs yen
By Sam Forgione
NEW YORK, Dec 12 (Reuters) - The U.S. dollar fell against most major currencies on Monday on concerns that the Federal Reserve could suggest in an upcoming policy statement that the greenback’s gains had gone too far, while a rally in oil prices boosted commodity-linked currencies.
The U.S. central bank is widely expected to raise interest rates on Wednesday for the first time this year and only the second time since the global financial crisis.
With a hike largely priced in, focus has turned to what signal the Fed will send on further policy tightening next year and the dollar’s nearly four percent rally against a basket of major currencies through Friday in the wake of Republican Donald Trump’s U.S. election victory on Nov. 8.
Most of those gains have come about as a result of U.S. Treasury yields shooting higher on expectations that Trump will enact policies that increase spending and debt as well as spur growth and inflation.
“A percentage of the market is worried about what the Fed could say that could potentially halt the current dollar strength that we’re seeing,” said Dean Popplewell, chief currency strategist at Oanda in Toronto.
The euro rose as much as 0.7 percent against the dollar to a session high of $1.0625 after falling to a one-week low of $1.0526 in early trading. The dollar was last flat against the yen at 115.35 yen, erasing early gains of about 0.8 percent that took the greenback to a 10-month high against the Japanese currency of 116.12 yen.
The dollar index, which measures the greenback against a basket of six major currencies, was last down 0.45 percent at 101.130, easing from an earlier 1-1/2-week high of 101.780.
The dollar tumbled against commodity-related currencies such as the Australian, New Zealand and Canadian dollars after oil prices surged to their highest since mid-2015 on the back of a weekend deal by OPEC and non-OPEC producers to curtail output.
“Commodities are up across the board,” said Richard Scalone, co-head of foreign exchange at TJM Brokerage in Chicago. “That helps emerging market currencies and commonwealth currencies.”
The dollar was last down 0.4 percent against the Canadian dollar at C$1.3122 after hitting C$1.3108, its lowest level against the Canadian dollar since Oct. 20. The Aussie was up 0.6 percent against the dollar at $0.7500, while the New Zealand dollar was up 0.9 percent against the greenback at $0.7201. (Reporting by Sam Forgione; additional reporting by Patrick Graham in London; Editing by Chizu Nomiyama)