* Fed expected to hike at two-day meeting beginning on
* Euro under pressure after ECB extends bond purchases
* Long dollar positions continue to rise- IMM data
* Oil price rally lifts Canadian dollar
TOKYO, Dec 12 The dollar inched lower on Monday
but didn't stray far from recent highs ahead of a U.S. Federal
Reserve meeting that's expected to deliver an interest rate hike
as well as clues to future monetary policy.
The euro remained under pressure after the European Central
Bank's dovish moves last week, while rallying oil prices helped
lift the Canadian dollar to a nearly 8-week high against its
The U.S. central bank is widely expected to hike interest
rates for the first time in 2016 at a two-day meeting that
begins on Tuesday, even as investors wait to see if policymakers
take a more cautious tone on the economy.
Markets were pricing in a nearly 100 percent chance for a
quarter percentage point increase to the Fed's target range of
0.25 to 0.50 percent.
Investors will be scrutinizing the Fed's economic
projections for signs of any change following Donald Trump's
surprise victory in the Nov. 8 U.S. presidential election.
"It's not so much about what the Fed does, but more about
what they say," said Masashi Murata, currency strategist for
Brown Brothers Harriman in Tokyo.
Investors have continued to build up long dollar positions
on expectations of higher inflation with increased
infrastructure spending under the Trump administration.
"Part of the positioning is also seasonal, as some players
try to accumulate long dollar positions ahead of the Christmas
holiday," Murata added.
Speculators increased positive bets on the U.S. dollar for a
third straight week through Dec. 6, pushing net longs to their
highest since early January, according to Reuters calculations
and data from the Commodity Futures Trading Commission released
"The speed of the dollar's rise has been quite faster than
anyone had expected, and we don't know much about what Trump's
administration will actually do," Harumi Taguchi, principal
economist at IHS Markit in Tokyo.
"So there might be a correction, but we don't know when it
will actually be," she said.
The dollar edged down 0.1 percent to 115.25 yen after
earlier touching 115.62 yen, its loftiest peak since February.
Also underpinning the yen, data released early in the
session showed Japan's October core machinery orders rose for
the first time in three months to beat expectations, in a
tentative sign of a pickup in capital expenditure.
The euro was flat on the day at $1.0560. It remained
under pressure after the European Central Bank announced on
Thursday that it will extend its bond-buying program longer than
many investors had anticipated, although it trimmed the size of
its monthly purchases.
The ECB's move also put more upward pressure on already
rising U.S. Treasury yields, which also bolstered the dollar's
The benchmark 10-year Treasury note yield was
last at 2.491 percent, above its U.S. close of 2.464 percent on
The dollar index, which tracks the greenback against a
basket of six major rivals, was 0.1 percent lower at 101.52
The commodity-linked Canadian dollar, meanwhile, gained as
oil prices shot up by 4 percent to their highest level since
2015 early on Monday, after OPEC and other producers over the
weekend reached their first deal since 2001 to jointly reduce
output in order to rein in oversupply and prop up the market.
The dollar was down 0.4 percent at C$1.3121 after
earlier dropping to C$1.3115, its lowest since late October.
(Reporting by Tokyo markets team; Editing by Eric Meijer and