* Fed cuts rate by 25 bps as expected but signals a possible
pause
* Chile's cancellation as APEC host raises hurdle for
US-China
* BOJ stands pat, triggers little reactions
* Graphic: World FX rates in 2019 http://tmsnrt.rs/2egbfVh
By Tomo Uetake
TOKYO, Oct 31 (Reuters) - The dollar declined against a
basket of major currencies on Thursday, reversing earlier gains,
after the Federal Reserve cut interest rates for the third time
this year and its signal for a potential pause in the easing
cycle was taken with a pinch of salt.
In lowering its policy rate by 25 basis points to a target
range of between 1.50% and 1.75%, the U.S. central bank dropped
a previous reference in its policy statement that it "will act
as appropriate" to sustain the economic expansion - language
that was considered a sign for future cuts. Still, lack of an explicit signal from the Fed that it is
done with easing for now was perceived to be less hawkish than
expected, helping to drive the dollar down.
"The new, slightly shorter, statement tries to keep their
options open and puts them back into a data-dependent mode, but
circumstances could mean that they have less optionality than
they think," said Tim Foster, portfolio manager at Fidelity
International in London.
The dollar index .DXY rose to as high as 98.00 as Fed
Chairman Jerome Powell spoke about its decision, the highest
since Oct. 17, before slipping. The index was last down 0.4% at
97.29, its lowest level in a week.
The euro last changed hands at $1.1165 EUR= , down 0.1%,
while the greenback last traded at 108.66 yen JPY= , 0.2% lower
on the day.
The dollar was also pressured versus the safe-haven yen by
the news that Chile has withdrawn as host of an APEC summit in
November where the United States and China had been expected to
take major steps toward ending a 15-month-old trade war.
Optimism that the world's largest economies would soon agree
on a partial deal has boosted risk appetite this week.
"The fact that Chile has cancelled the mid-November APEC
Summit should not be a deal breaker for the U.S. and China to
reach a truce," said Tai Hui, Asia chief market strategist at
JPMogan Asset Management in Hong Kong.
"If the two sides were genuinely willing to reach an interim
deal before mid-December, when the next scheduled hike in tariff
on Chinese exports is due to take place, they will find a venue
to get the deal done."
The Bank of Japan kept its ultra-easy monetary policy in
place as expected and changed its forward guidance to more
clearly signal the future chance of a rate cut. Currency markets
hardly budged after the BOJ decision. Traders are now focussing on BOJ Governor Haruhiko Kuroda's
press conference later on Thursday to gauge his assessment of
the risks posed by the U.S.-China trade war and Brexit.
Sterling edged up after British Prime Minister Boris Johnson
won parliamentary approval on Wednesday to hold a general
election in December, though moves were limited as large
currency options expiring this week curbed volatility.
The pound GBP=D4 was trading at $1.2927, 0.2% higher on
the day.
The Australian and New Zealand dollars firmed as investors
scaled back wagers on local interest rate cuts after the Fed
indicated it might be pausing in its easing campaign.
The Aussie AUD=D4 gained as much as 0.4% to mark a
three-month top of $0.6930, while the kiwi dollar NZD=D4
popped up 0.7% to $0.6433, its highest in more than a week.
Westpac economists changed their call on New Zealand
interest rates, now expecting no cut at the Reserve Bank of New
Zealand's policy meeting on Nov. 13. Traders have also been
lengthening the odds on a move from the Reserve Bank of
Australia in the near term.