* Dollar flat into first day of Fed meeting
* Euro steady as Italian firms announce restructuring plans
* Graphic: World FX rates in 2016 tmsnrt.rs/2egbfVh (Updates prices, adds details and quotes)
By Patrick Graham
LONDON, Dec 13 (Reuters) - 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 recent gains.
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 strongly in the past month on the new president taking steps to bolster growth that will push inflation higher, there are also concerns that he may spark protectionism globally.
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 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 Pepper said.
“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 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 year’s time.
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 need be.
Sterling inched higher, helped by 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 John Stonestreet)