(New throughout, updates prices and adds analyst comment)

* Markets await central bank indications on the rate

outlook

* Euro rises against the dollar

* Australian dollar rises after central bank rate hike

* Dollar index falls for second straight session

By Chibuike Oguh

NEW YORK, March 17 (Reuters) - The U.S. dollar was

softer against peer currencies for the second straight session

on Tuesday, reflecting market positioning ahead of major central

bank interest rate decisions this week.

The dollar had reached a 10-month high as the Middle East

conflict and rising oil prices prompted investors to seek safety

in U.S. assets.

The U.S. Federal Reserve will announce its policy decision

on Wednesday, with the European Central Bank, the Bank of

England and the Bank of Japan following a day later. They are

all expected to keep rates unchanged although traders will be

looking out for commentary about inflation and economic outlook

in the wake of the Middle East conflict.

Expectations for Federal Reserve easing have also been

scaled back, with markets now assigning about 25 basis points of

cuts this year. Traders are pricing in almost two European

Central Bank rate hikes in 2026, a sharp shift from the roughly

50% chance of a cut seen before the conflict began.

The dollar was down 0.11% to 0.787 against the Swiss franc

, on track for the second straight day of declines.

The dollar index had hit 100.54 on Friday, its

highest level since May 2025. It has eased from that peak in the

last two sessions, and was last down 0.21% to 99.65.

"I think this is mostly market positioning but I am

beginning to detect a subtle change in sentiment although we

wouldn't know for sure until we get to the other side of the

Federal Reserve meeting," said Marc Chandler, chief market

strategist at Bannockburn Global Forex LLC. "It seems to me that

since the (Iran) war began, the dollar was bought on dips and

now I think the dollar is being sold on rallies."

Brent crude futures remained above $100 a barrel on

worries about supply, with the Strait of Hormuz mostly shut.

They have risen more than 40% since February and were last up

1.94% to $102.15 per barrel.

Iran renewed attacks on the United Arab Emirates on Tuesday,

causing oil loading at the port of Fujairah to be at least

partly halted after the third attack in four days ignited a fire

at the export terminal. Fujairah is located on the Gulf of Oman,

just outside the Strait of Hormuz.

The euro was up 0.26% against the dollar at $1.153450 after

dropping to as low as $1.1409 in the prior session, for its

lowest level since August 2025.

AUSTRALIA DOLLAR RISES AFTER SECOND RATE HIKE

Australia's central bank raised rates for a second straight

month to a 10-month high, undoing two of the three cuts it made

last year and cautioning that risks to inflation have tilted

further to the upside. It was the central bank's most tightly

contested vote since it began disclosing tallies last year, with

the board split 5-4 in favor of the hike.

The Australian dollar rose 0.41% to 0.71005 against the

dollar.

The yen has veered toward the 2024 forex intervention zone

of 161 amid rising oil prices and the Middle East conflict.

Japanese Finance Minister Satsuki Katayama said on Monday and

reiterated on Tuesday that the government was prepared to take

decisive steps against volatility in foreign exchange and other

financial markets.

Bank of Japan Governor Kazuo Ueda said underlying inflation was

accelerating toward the bank's 2% target, stressing that price

rises must be matched by solid wage gains.

The Japanese yen was last up 0.06% against the

greenback to 158.95 per dollar.