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Dollar buoyed by safe-haven demand

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Markets fear Israel-Iran fighting could spillover into

regional

conflict

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Monetary policy decisions by Fed, BOJ, BoE due through the

week

By Johann M Cherian

June 16 (Reuters) - The dollar firmed against major

currencies on Monday, driven by safe-haven buying from investors

fearing the Israel-Iran fighting could escalate into a broader

regional conflict as they braced for a week packed with central

bank meetings.

As both Iran and Israel showed no signs of backing off from

their attacks, the prospect that Tehran might seek to choke off

the Strait of Hormuz - the world's most important gateway for

oil shipping - raised broader economic risks from disruptions in

the energy rich Middle East.

Scheduled weekend talks between Iran and the United States

on Tehran's nuclear programme were also shelved after Israel

launched its surprise attack on Friday.

On Monday, the dollar rose 0.14% to 144.3 Japanese yen

, while the euro was 0.14% lower at $1.1534.

In early Asia hours, the greenback was steady against the

Swiss franc at 0.81, while an index that measures the

dollar against six others was steady at 98.25.

Currencies that are positively correlated to risk such as

the Australian dollar and the New Zealand Dollar

were marginally higher.

"The dollar's role as a safe haven will surely be tested,

and recent price action has been inconclusive," said Win Thin,

global head of markets strategy at Brown Brothers Harriman.

"If the Fed delivers a dovish hold as we expect, the dollar

is likely to resume weakening due to the worsening fundamental

backdrop in the U.S."

Geopolitical tensions were the latest twist for investors

and central bank policymakers who have been trying to navigate

economic uncertainty triggered by U.S. President Donald Trump's

move to reshape the global trade order this year.

Despite the dollar's broader rise in the past few sessions,

analysts were less convinced that the trend could continue until

there was more clarity on the tariff front.

The currency has lost over 9% in value this year as

investors remain nervous over Trump's deadline on trade deals

that come due in about three weeks, while agreements with major

trade partners including the European Union and Japan are yet to

be signed.

Investors now will look progress in any bilateral meetings

with the U.S. on the side of a Group of Seven leaders meet in

Canada.

Top on the agenda this week is a host of central bank

monetary policy decisions, with the spotlight on the U.S.

Federal Reserve on Wednesday.

The central bank is widely expected to leave borrowing costs

steady but investors will likely lap up Fed's views on recent

data that has broadly indicated softening economic activity even

as risks to increasing price pressures stay high.

"What you're going to see from their growth forecasts is

that the shift towards lower growth is very much upon us and

that will keep the statement fairly neutral," Chris Weston, head

of research at Pepperstone said.

The Bank of Japan is expected to deliver its interest rate

decision at the end of its two-day meeting on Tuesday, with

traders largely pricing-in no change to policy.

Expectations are that the central bank could also consider

tapering its government bond holdings from the next fiscal year

as the government pushes for more domestic ownership.

Central banks in the UK, Sweden and Norway are also slated

to unveil their policy decisions.

Against an uncertain global backdrop, gold prices

rose 0.22% to $3,435.5 an ounce and stayed just shy of their

April record high.

Longer-dated U.S. Treasuries were also marginally lower

after Friday's spike as investors considered the implications

geopolitical tensions could have on price pressures.