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Dollar index edges higher

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Sterling down with BoE decision in view

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Aussie and kiwi dip to new lows

(New throughout, updates headline and prices, adds fresh

analyst comment, byline, NEW YORK to dateline)

By Chibuike Oguh and Stefano Rebaudo

NEW YORK, Dec 18 (Reuters) - The U.S. dollar advanced

against its peers on Wednesday ahead of the Federal Reserve's

monetary policy decision later in the session, with markets

expecting the central bank to deliver its third consecutive

interest rate cut.

The Fed will likely lower its benchmark policy rate by 25

basis points to the 4.25% to 4.50% range and officials are

expected to also signal a pause in rate cuts next year. The

futures market currently implies a nearly 97% chance of a cut,

according to the CME's FedWatch tool.

The Fed will release its policy statement and updated

economic projections at 2 p.m. EST (1900 GMT), with Chair Jerome

Powell scheduled to hold a press conference half an hour later.

"My own sense would be to expect the Fed to have a hawkish

cut, meaning that they cut rates but the dot plot shows fewer

cuts than they said in September," said Marc Chandler, chief

market strategist at Bannockburn Global Forex in New York.

"Powell will also repeat what he said before that the

economy is growing stronger than expected but dampen the idea.

So through the dot plot and his word cues, I think the market

takes away from it that the Fed is not going to be as aggressive

next year as they anticipated."

The dollar strengthened 0.04% to 0.89285 against the Swiss

franc in choppy trading. The euro was down

0.16% at $1.0474.

The U.S. dollar index, which measures the greenback

against six rivals, was up 0.19% at 107.13, after hovering near

a three-week high.

The dollar strengthened 0.39% to 154.055 against the

Japanese yen, with markets cutting bets that the Bank

of Japan will raise rates on Thursday in favour of a January

hike following media reports.

The Bank of England is also expected to hold rates steady on

Thursday. Sterling edged higher versus the euro but

dropped against the dollar as investors look at the Fed

policy meeting and after British inflation data was in line with

expectations. The currency weakened 0.1% to $1.2699.

Sweden's Riksbank is widely expected to cut rates by as much

as half a point, while the Norges Bank is set to leave rates

unchanged. The Norwegian crown dropped 0.43% to $11.2422

, while the Swedish crown weakened 0.12% versus

the dollar to 10.9705.

Dour expectations for Chinese economic growth sent the

Aussie and New Zealand's kiwi down. China is Australia's largest

two-way trading partner.

The Australian dollar slid to $0.63055, its lowest

since October 2023. It was last down 0.35% at $0.6314. The kiwi

touched a fresh two-year low of $0.57205.

The offshore yuan traded at 7.296 per dollar on

Tuesday, holding steady near a 13-month low against the dollar.

Bitcoin retreated from recent highs. The world's largest

cryptocurrency fell 2.06% to $104,227.