(Updates prices throughout, adds oil settlement and fresh

analyst quote)

* BOJ holds interest rates steady in split vote

* Euro, Swiss franc lose ground against dollar

* Dollar index edges higher after two-day losing streak

ahead of Fed meeting

By Chibuike Oguh

NEW YORK, April 28 (Reuters) - The dollar firmed on

Tuesday as risk-off flows driven by the Iran war offset a brief

rally in the yen following the Bank of Japan's most divided

policy decision under Governor Kazuo Ueda.

The BOJ kept its policy rate unchanged at 0.75%, but a rare 6-3

split - the widest since Ueda took office - fueled expectations

of a possible rate hike as early as June. The yen initially

strengthened but reversed course after Ueda's press conference

dampened the growth outlook, leaving it little changed at 159.65

per dollar and 186.90 per euro.

Three dissenting board members - Junko Nakagawa, Hajime Takata

and Naoki Tamura - voted to raise the policy rate to 1.0%,

citing sharply rising inflation risks stemming from war-related

energy supply disruptions through the Strait of Hormuz.

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 0.11% at $1.17085. The dollar

strengthened 0.51% 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 crude rose 2.8% to settle at $111.26 per barrel.

The benchmark S&P 500 index was down about 0.5%. U.S.

Treasury yields were mostly higher, with the yield on benchmark

U.S. 10-year notes up 1.7 basis points to 4.354%.

Spot gold fell 1.84% to $4,596.50 an ounce.

FED TRANSITION IN FOCUS

Attention is also turning to the two-day Federal Open Market

Committee meeting that ends on Wednesday. It is widely expected

to be Jerome Powell's last as head of the U.S. central bank.

Senator Thom Tillis on Sunday lifted his hold on the

confirmation of former Fed Governor Kevin Warsh as Powell's

successor after the U.S. Justice Department ended its criminal

investigation into Powell.

Warsh is expected to advocate for rate cuts, though surging

energy prices linked to the Iran conflict could make other

members of the central bank's policy-setting Federal Open Market

Committee cautious.

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

but the FOMC assessment of the economy may improve," said Steve

Englander, global head of G10 FX research at Standard Chartered

in New York. "The inflation picture is improving very slowly at

best and could be an emerging issue for Warsh to deal with" when

he takes office.

Sterling fell 0.12% to $1.352. The Canadian dollar

weakened 0.42% to C$1.368 per dollar, ahead of the Bank of

Canada's rate decision on Wednesday. Central banks in the euro

zone and UK are also set to deliver decisions this week.

Bitcoin fell 1.08% to $76,145.40, while ether was

flat at $2,292.25.

"We maintain a bearish USD outlook into this week's central

bank risk events as we look to the Bank of Canada and Federal

Reserve rate decisions on Wednesday, followed by the Bank of

England and ECB on Thursday. These meetings follow the BoJ's

hawkish hold, where the board delivered a 6-3 vote that was

complemented by Governor Ueda's stated intention to maintain a

commitment to tightening," Scotiabank analysts led by Shaun

Osborne said in an investor note.