August 2, 2018 / 1:03 AM / in 2 months

FOREX-Dollar holds gains after upbeat Fed stays course for more rate hikes

* Federal Reserve kept rates unchanged, on track to hike more

* British pound little changed ahead of Bank of England meeting

* Mexican peso firms, trades near three-month high

By Daniel Leussink

TOKYO, Aug 2 (Reuters) - The U.S. dollar held onto most of its gains against major peers on Thursday after the Federal Reserve gave an upbeat assessment of the world’s biggest economy and stayed on course to gradually lift interest rates.

The dollar was already well bid by worries about a further escalation in the Sino-U.S. trade dispute and higher U.S. Treasury yields.

The Fed kept interest rates unchanged as widely expected, and said U.S. economic growth has been rising strongly and the job market has continued to strengthen.

“The Fed delivered rather hawkish comments in the statement emphasizing the strength of the U.S. economy,” said Osamu Takashima, head of G10 FX strategy, at Citigroup Global Markets Japan.

“There was no big surprise in last night’s statement, but the overall tone was a little bit stronger than last one.”

The dollar index, which measures the greenback against a basket of six currencies, edged higher on Thursday to trade at 94.660, well off a 3-1/2-week low of 94.084 hit last week.

Global financial markets remained focused on the U.S.-driven international trade war, with U.S. administration officials saying on Wednesday that President Donald Trump is proposing a higher 25 percent tariff on $200 billion worth of Chinese imports.

The safety bid for the dollar was further bolstered by higher U.S. Treasury yields.

The greenback edged slightly lower against the yen to 111.68 yen though it still held on to much of its gains made on Tuesday following the Bank of Japan’s pledge to keep rates low for an extended period, even as it made modest tweaks to its policy.

The euro remained soft against the dollar, trading at $1.1662.

The British pound was little changed at $1.3128 ahead of the Bank of England’s policy meeting later on Thursday, with markets widely expecting interest rates to be raised for the second time since the global financial crisis.

The Canadian dollar traded at C$1.3001, near Wednesday’s seven-week high of C$1.2975.

The Mexican peso changed hands at 18.583 on the dollar , firming near Monday’s three-month high of 18.498 on growing optimism about the renegotiation of the North American Free Trade Agreement. (Editing by Shri Navaratnam)

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