* Pause in hostilities sends oil prices lower, but Fed rate

hike speculation remains

* A 25-basis-point Fed rate hike forecast stands at roughly

40%, per LSEG

* BOE and BOJ widely expected to leave rates unchanged this

week

(Updates prices to early European trade)

By Medha Singh and Satoshi Sugiyama

July 28 (Reuters) - The U.S. dollar steadied near a

four-week high on Tuesday as traders assessed the possibility of

a Federal Reserve interest rate hike this week, even as falling

oil prices offered some relief on the inflation front.

The dollar index, which measures the greenback

against a basket of currencies including the yen and the euro,

was about flat at 101.50 after touching its highest since July

1. The euro ticked up 0.05% to $1.1370. Against the

Japanese yen, the dollar traded at 163.745, while

sterling gained 0.1% to $1.330.

The dollar's resilience reflects a sharp repricing of Fed

expectations in recent months. Treasury yields have climbed

steadily since April as the U.S.-Iran conflict stoked concerns

about inflation and a hawkish debut from Fed Chair Kevin Warsh

reinforced expectations of higher interest rates.

While oil prices have retreated after the U.S. paused

attacks on Iran over the weekend, yields remain near their

multi-month highs.

"The move in U.S. yields has been quite powerful in

explaining the dollar's moves," said Dominic Bunning, head of

G10 FX strategy at Nomura in London.

He said there was a risk that investors have become too

convinced of a near-term rate hike, meaning any dovish outcome

could force traders to unwind long-dollar positions.

Net long dollar positions were at their highest since 2015

in the latest week, weekly U.S. regulator data

showed.

The Fed concludes its two-day policy meeting on Wednesday,

with a growing number of major brokerages warning that

policymakers could raise rates, given this month's surge in oil

prices.

Markets are pricing a nearly 40% chance of a 25-basis-point

rate increase on Wednesday, up from about 20% a week ago,

according to LSEG data. Traders see almost a 95% probability of

a hike by September.

Investors will also look to U.S. second-quarter GDP data and

the Fed's preferred inflation gauge, core PCE inflation, this

week.

In other major currencies, the Australian dollar

weakened 0.3% versus the greenback to $0.697, as Australia's

central bank chief Michele Bullock said underlying inflation

remained too high and a further slowdown in domestic demand may

be required to tame prices. New Zealand's kiwi traded at

$0.5772.

PACKED CENTRAL BANK WEEK

The Bank of England and Bank of Japan are widely expected to

keep interest rates unchanged at their meetings on Thursday and

Friday, respectively, while maintaining a cautious stance on

inflation.

Traders have been on intervention watch for weeks as the

yen's unabated slide pushed it to fresh 40-year lows against the

dollar at 163.99 last week.

The BOJ is expected to keep the door open to further rate

hikes to support the currency, though policymakers are likely to

remain vague on the timing and pace of any tightening.

"Can they almost coordinate a little bit whereby the BOJ can

deliver a slightly more hawkish message and the (Ministry of

Finance) comes in, then you get more bang for your buck,

effectively? We saw it in July 2024 .. that was almost the sweet

spot for Japan intervention," Bunning said.

"It can be potentially more futile and that's the risk they

face."

Tokyo stepped into the market in April and May as the yen

breached 160 per dollar, though the moves did little to alter

its broader decline.

In a Reuters NEXT Newsmaker interview on Tuesday, Japanese

Finance Minister Satsuki Katayama reiterated that Tokyo's stance

of responding to currency moves as needed was unchanged, adding

that she believed Washington shared that view.

The yen offered little reaction to news of an earthquake

with a preliminary magnitude of 7.1 striking Japan's southern

Kumamoto prefecture on Tuesday.

In cryptocurrencies, bitcoin fell 2.3% to $63,414.16.

Ether declined 3.4% to $1,879.71, the biggest percentage

drop in a month.

(Reporting by Medha Singh and Satoshi Sugiyama; Editing by Shri

Navaratnam, Stephen Coates, Amanda Cooper and Saumyadeb

Chakrabarty)