FOREX-Dollar edges higher before Fed decision

* Graphic: World FX rates in 2019 http://tmsnrt.rs/2egbfVh

By Saikat Chatterjee
LONDON, Sept 18 (Reuters) - The dollar held near a
seven-week high against the Japanese yen on Wednesday before the
outcome of a Federal Reserve meeting where officials are widely
expected to cut interest rates by a quarter of a percentage
point.
Against the yen JPY= , the dollar edged up 0.1% to 108.23
yen, just below a seven-week high of 108.37 yen tested
overnight. The dollar index against a basket of other currencies
.DXY crept 0.2% up to 98.43.
With recent economic data proving to be strong -- a
Citigroup U.S. economic surprise index .CESIUS is holding at
its highest levels this year -- some market participants are
buying the dollar in case the Fed signals a more confident view.
"All in, we think the meeting outcome risks disappointing
market expectations, which are perhaps leaning towards a more
dovish outcome, resulting in a renewed bid for the dollar,"
Scotiabank strategists said.
The dollar has been driven more by trade tensions between
Washington and Beijing this year than by U.S. monetary policy.
The dollar has gained nearly 1% against the yen since the last
rate cut in July.
Morgan Stanley strategists believe that any dollar upside is
likely to be capped, because market expectations are not overly
dovish and a trade deal between the United States and China
seems likely.
A retreat in global oil prices also restored some calm to
markets. Oil prices fell in Asia, extending Tuesday's 6%
decline, after Saudi Arabia's energy minister said the kingdom
had tapped stockpiles to restore oil supplies to where they
stood before weekend attacks shut around 5% of global output.
The euro edged 0.2% lower at $1.1049, about 1% above the
$1.0927 it reached last week, the lowest in more than two years.
After the Fed releases its policy decision, attention will
turn to the Bank of Japan's meeting ending on Thursday, to see
whether it eases policy, too.
Deepening negative rates will be an option if the BOJ eases,
although the central bank may accompany that with measures to
mitigate the pain on financial institutions, sources have told
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Dollar positions https://tmsnrt.rs/302mqb3
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