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* Fed expected to hike at two-day meeting beginning on Tuesday
* 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 (Reuters) - 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 U.S. counterpart.
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 on Friday.
"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 appeal.
The benchmark 10-year Treasury note yield was last at 2.491 percent, above its U.S. close of 2.464 percent on Friday.
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 Richard Borsuk)