* Canadian dollar rises as c.bank official hints at rate hike
* Loonie extends gains, touches highest in about 2 months
* Dollar index steady, focus on Fed policy meeting
By Masayuki Kitano
SINGAPORE, June 13 (Reuters) - The dollar held steady against a basket of currencies on Tuesday, with the focus on the U.S. Federal Reserve’s two-day policy meeting, while the Canadian dollar rose after its central bank hinted interest rates could rise sooner than anticipated.
The dollar index, which tracks the greenback against a basket of six major rivals, last traded at 97.245, staying above a seven-month low of 96.511 set last week.
The Canadian dollar touched its strongest in about two months at C$1.3287 per U.S. dollar at one point, extending its gains after climbing more than 1 percent on Monday.
The loonie got a lift after a senior Bank of Canada official raised the prospect that an interest rate rise could come sooner than anticipated.
The market’s focus this week is on central bank meetings, with the Fed’s two-day policy meeting set to start later on Tuesday.
With the U.S. central bank widely expected to raise interest rates, investors’ focus will be on any fresh hints on the pace of further tightening in the months to come, and its assessment of the economy and outlook on inflation.
Investors will also be watching for any fresh details on the Fed’s plans for trimming its balance sheet.
“Given that the minutes (of the last Fed meeting) contained lots of details, one possible scenario is that there will be an announcement in June and that it will start in September,” said Masafumi Yamamoto, chief currency strategist for Mizuho Securities in Tokyo, referring to the Fed’s possible balance sheet reduction.
If that turns out to be the case, U.S. yields and the dollar will probably edge higher, Yamamoto said.
Elsewhere, the Bank of England is set to announce its interest rate decision on Thursday, and the Bank of Japan also holds a policy meeting on June 15-16.
Against the yen, the dollar edged up 0.1 percent to 110.09 , having pulled back from a one-week high of 110.815 yen set on Friday. The euro eased 0.1 percent to $1.1192.
Sterling held steady at $1.2659, staying above Friday’s low of $1.2636, its lowest level since mid-April.
The pound had shed 2.3 percent in the previous two trading days following the shock results of Thursday’s UK general election that left Prime Minister Theresa May short of a parliamentary majority, that would have strengthened her hand as Britain prepares for Brexit negotiations with Europe. (Editing by Jacqueline Wong)