* Fed cuts rate by 25 bps as expected but signals a possible
pause
* Chile cancels APEC summit where U.S.-China trade deal
expected
* BOJ seen keeping policy steady, decision due later
Thursday
* Graphic: World FX rates in 2019 http://tmsnrt.rs/2egbfVh
By Tomo Uetake
TOKYO, Oct 31 (Reuters) - The dollar dipped against a basket
of major currencies on Thursday, reversing earlier gains, after
the Federal Reserve cut interest rates for the third time this
year but signalled its rate-cut cycle might be at a pause, as
was broadly expected.
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 98.00 as Fed Chairman
Jerome Powell spoke about its decision, the highest since Oct.
17, before slipping. The index was last down 0.3% at 97.37, its
lowest level in a week.
The euro last changed hands at $1.1167 EUR= , while the
greenback last traded at 108.66 yen JPY= .
The dollar also temporarily dipped on news that Chile has
withdrawn as host of an APEC trade summit in November where the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 U.S. and China will soon agree on a
partial deal has boosted risk sentiment this week.
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 $1.2921, a shade 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 reached a three-month top at $0.6918,
having been as low as $0.6849 at one stage on Wednesday, and
the kiwi dollar NZD=D4 popped up to $0.6420, leaving behind
Wednesday's low of $0.6335.
Westpac economists changed their call on New Zealand
interest rates, now expecting no cut at the Reserve Bank of New
Zealand's (RBNZ) policy meeting on Nov. 13. Investors have also
been lengthening the odds on a move from the Reserve Bank of
Australia (RBA) in the near term.
The Bank of Japan will likely hold off on expanding stimulus
later in the day, as calm markets and easing U.S.-China trade
tensions take the heat off the central bank from using its
limited monetary arsenal to fight the risk of recession.