March 16, 2018 / 12:33 AM / 2 years ago

FOREX-Dollar holds gains as focus shifts to Fed's policy meeting

* Dollar index holds firm after rising 0.5 pct overnight

* Trade woes linger but market turns focus to Fed meeting

* Canadian dollar near 8-mth lows following soft data

By Shinichi Saoshiro

TOKYO, March 16 (Reuters) - The dollar held gains against a basket of peers on Friday, as recent concerns about the currency arising from trade tensions eased slightly and next week’s Federal Reserve policy meeting came into focus.

The two-day Federal Open Market Committee meeting begins on March 19 at which the U.S. central bank is expected to raise interest rates for the first time this year.

The dollar index versus a group of six major currencies stood flat at 90.138 after climbing 0.5 percent the previous day.

Prior to the overnight bounce, the index had fallen for three straight sessions as fears of a global trade war grew amid signs of rising U.S. protectionism.

“U.S. protectionism is a key factor, but it is also a theme with a long timeframe,” said Yukio Ishizuki, senior currency strategist at Daiwa Securities.

“The market perhaps reacted excessively and the dollar was oversold, and now we are seeing those moves being balanced out as participants turn their focus on other events.”

The dollar was little changed at 106.330 yen, having pulled back from an eight-day low of 105.790 set on Thursday.

The greenback was still down 0.45 percent on the week against the safe haven yen, which was boosted earlier as a political scandal engulfed Japanese Prime Minister Shinzo Abe, casting doubts on the sustainability of his economic stimulus policies.

The euro was effectively flat at $1.2306 after declining 0.5 percent overnight. The common currency was little changed on the week.

The Canadian dollar struggled near an eight-month low plumbed overnight, when soft housing data reinforced views that the Bank of Canada could slow down the pace of its interest rate hikes.

The loonie also came under pressure after President Trump’s comments on commerce with Canada renewed trade concerns.

The Canadian dollar was little changed at C$1.3050 per dollar after retreating to C$1.3068, its weakest since late June 2017.

The Australian and New Zealand dollars were 0.1 percent lower at $0.7789 and $0.7270, respectively, after suffering large losses overnight against the broadly higher U.S. dollar.

Reporting by Shinichi Saoshiro; Editing by Sam Holmes

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