(Updated in New York morning time)

* The Fed is widely expected to leave rates unchanged at

3.50% to 3.75%

* Markets are watching whether the Fed drops its easing bias

from the policy statement

* The BOJ raised its benchmark rate by 25 basis points to 1%

in a 7-1 vote

By Karen Brettell

NEW YORK, June 16 (Reuters) - The dollar was modestly weaker

against the euro on Tuesday as investors awaited the conclusion

of the Federal Reserve's policy meeting the following day, the

first chaired by Kevin Warsh, with markets watching for any

signals that the central bank could raise interest rates later

this year.

The greenback has held relatively firm despite rising optimism

that the United States and Iran will soon end their war, which

has sent Treasury yields and oil prices lower.

"The Fed decision may be keeping the dollar sellers at bay,"

said Adam Button, chief currency analyst at investingLive.

"There's a lingering sense in markets that (Warsh is) more of a

hawk than he let on during confirmation."

The pullback in oil prices could help ease inflation pressures,

which have led markets to price in 59% odds of a rate hike by

year-end.

But with inflation still well above the Fed's 2% target,

Warsh may strike a hawkish tone at his post-meeting press

conference. The Fed is widely expected to hold rates steady at

3.50% to 3.75% and could drop its easing bias from the policy

statement.

The dollar index, which measures the greenback

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

fell 0.08% to 99.61, with the euro up 0.09% at $1.1601.

The Japanese yen was flat against the greenback at 160.35

per dollar, after the Bank of Japan raised its benchmark rate by

25 basis points as expected to 1%, its highest level since 1995,

in a bid to curb inflationary risks stemming from the Middle

East conflict.

The board's 7-1 vote, however, left some uncertainty about

the timing of the next hike.

Derek Halpenny, head of research for global markets EMEA at

MUFG, said the BOJ was as hawkish as could have been expected.

"They've emphasized upside inflation risks. They've made

that quite clear. They've made very clear that the monetary

stance is still accommodative, and they've made clear that the

guidance is the same as before, which is essentially that they

can continue to raise rates," he said.

The Reserve Bank of Australia, meanwhile, held rates steady

at 4.35% in a unanimous decision, its first pause this year,

even as inflation remains elevated. The Australian dollar

was last little changed at $0.7072.