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* BOJ holds rates steady in split vote

* Euro and Swiss franc lose ground against dollar

* Dollar index edges higher after two-day losing streak

ahead of Fed meeting

By Chibuike Oguh and Sophie Kiderlin

NEW YORK/LONDON, April 28 (Reuters) - The dollar

strengthened on Tuesday as risk-off sentiment driven by the Iran

war outweighed a brief yen rally sparked by the Bank of Japan's

most divided policy vote under Governor Kazuo Ueda.

The BOJ held its policy rate steady at 0.75%, but the 6-3 vote -

the biggest internal divide of the Ueda era - boosted

expectations of a June rate hike. The yen initially firmed on

the decision before reversing after Ueda's press conference cast

doubt on the growth outlook, leaving the currency little changed

at 159.65 against the dollar and 186.72 against the euro.

Three dissenting members - Nakagawa, Takata and Tamura -

proposed raising the policy rate to 1%, arguing that war-driven

energy disruptions through the Strait of Hormuz had skewed

inflation risks sharply to the upside.

Meanwhile, U.S. President Donald Trump discussed a new Iranian

proposal on resolving the war with his top national security

aides on Monday. But a U.S. official said later that Trump was

unhappy with the proposal because it did not address Iran's

nuclear programme.

The euro was down 0.17% at $1.1694. The dollar

strengthened 0.6% to 0.79 against the Swiss franc. The

U.S. dollar index snapped a two-day losing streak to

trade 0.2% higher at 98.66.

"We're having the traditional risk-off correlations since

the Iran war - a rise in oil prices, a stronger dollar, higher

U.S. yields, lower Fed rate cut expectations, and lower gold,"

said Eugene Epstein, head of structuring for North America at

Moneycorp in New Jersey.

Brent rose 3% to $111.47 per barrel. The benchmark

S&P 500 index fell 0.75%. U.S. Treasury yields were

higher across the board, with the yield on benchmark U.S.

10-year notes up 2.2 basis points to 4.358%. Spot

gold fell 2.34% to $4,572.26 an ounce.

FED TRANSITION IN FOCUS

Markets are also watching Wednesday's Federal Open Market

Committee meeting, widely expected to be Jerome Powell's last as

chair.

Senator Thom Tillis on Sunday dropped his blockade of Fed chair

nominee Kevin Warsh after the Justice Department ended its

criminal investigation of Powell.

The U.S. Senate Banking Committee is scheduled to vote

Wednesday on Warsh's confirmation, and with Tillis' support the

outcome is all but assured ahead of Powell's term expiring on

May 15.

Warsh is expected to push quickly for rate cuts, though

rising energy prices from the Iran conflict mean fellow FOMC

members are likely to be skeptical.

"It's not a meeting where rates policy is on the front

burner, but the FOMC assessment of the economy may improve,"

Steve Englander, global head of G10 FX research at Standard

Chartered in New York, said. "The inflation picture is improving

very slowly at best and could be an emerging issue for Warsh to

deal with" when he takes office.

The British pound fell 0.17% to $1.351. The Canadian

dollar weakened 0.37% to C$1.368 per dollar, ahead of the

Bank of Canada's rate decision later this week. Central banks in

the euro zone and UK are also set to deliver decisions this

week.

Bitcoin fell 1.34% to $75,940.25, while ether

declined 0.89% to $2,271.93.