* Dollar flat into first day of Fed meeting
* Euro steady as Italian firms announce restructuring plans
* Rise in inflation supports sterling
* Graphic: World FX rates in 2016 tmsnrt.rs/2egbfVh
(Updates prices, adds UK inflation)
By Patrick Graham
LONDON, Dec 13 The dollar steadied against the
yen and euro on Tuesday after its weakest day in a week, with
markets still uneasy that a Federal Reserve meeting ending on
Wednesday may provoke more investors to cash in the greenback's
Barclays was the latest major bank to cast some doubt on a
dollar rally extending into a first quarter set to be dominated
by the first policy initiatives from the Trump administration.
While investors have bet on the new president taking steps
to bolster growth that will push inflation higher, there are
also concerns that he may spark protectionism globally, driving
cash into traditional safe havens like the yen.
A rise in Fed interest rates on Wednesday, a big reason for
the dollar index's 7 percent rise since September, looks fully
priced in and there are also doubts over whether the U.S.
central bank will want to send a strong signal that more
tightening is to follow.
"We think the meeting may be a catalyst for people to take
some profit on long dollar positions," Barclays analyst Hamish
"The dollar tends not to perform particularly well in
December. If you put that together with a well priced Fed
meeting plus already long positioning, it is the right set-up
for a pullback."
The yen strengthened to less than 115 yen per dollar in
Asian trade before settling at 115.34, down 0.2 percent on the
day but almost a full yen stronger than 24 hours previously.
It has borne the brunt of the dollar's rally in the past
month, down 13 percent since early October. But some traders and
analysts have begun to wonder if the Japanese currency might
benefit next year if global political risks grow.
Barclays forecasts the dollar weakening to 100 yen in a
The euro was little changed at $1.0629, having gained
0.7 percent on Monday as German bund yields rose amid signs
Italy will bail out Italian bank Monte dei Paschi di Siena if
Sterling inched higher, helped by higher than
expected inflation for November and comments from finance
minister Philip Hammond backing a transition period to smooth
the process of leaving the European Union.
"Rates markets are discounting close to five 25 basis point
Fed rate hikes by the end of 2018," analysts from BNP Paribas
said in a note to clients.
"With the Fed likely to be cautious in its forward-looking
language on Wednesday, those positioned long dollars heading
into the meeting may be concluding that risk-reward is not
attractive for staying in positions into the event risk."
(Editing by Robin Pomeroy)