To update prices and add a comment from an analyst

From Ray We

Singapore, June 17 (Reuters) - The dollar edged lower on Wednesday ahead of the Federal Reserve's first monetary policy decision under new chairman Kevin Warsh, as continued optimism over the interim U.S.-Iran deal boosted risk appetite and reduced demand for the U.S. currency.

The yen did not rise significantly amid the dollar's decline , hovering near levels that might prompt intervention from authorities. The Bank of Japan raised interest rates on Tuesday as expected, but this offered few new indications of the future course of monetary policy.

Currency movements were largely limited in the Asian session, as investors hesitated to make big moves ahead of the Federal Reserve's interest rate decision later in the day.

The euro settled at $ 1.1613 , and the British pound was little changed at $ 1.3431 .

The Federal Reserve is widely expected to leave interest rates unchanged at its first meeting under new chairman Warsh. However, the central bank's statement, economic projections, and press conference will be scrutinized for any signs of a shift away from its dovish stance, as officials increasingly favor tightening monetary policy to counter inflation risks.

Eric Wiseman, senior analyst and portfolio manager at MFS Investment Management, said, "The Federal Reserve is likely to signal... a neutral direction for monetary policy going forward."

"Warsh will face a barrage of questions about how he expects the Federal Reserve to lead in the direction he has indicated for years... and he may not want to make any statements without first reaching a consensus within the board," he continued.

Against a basket of currencies, the dollar index slipped slightly to 99.50 , giving up some of the gains it had made as a safe haven as details emerged of the interim agreement between the United States and Iran to end the war.

The yen was last trading at 160.27 against the dollar, putting traders on alert for any possible intervention by Japanese authorities to support the struggling currency.

The Bank of Japan raised interest rates to their highest level in 31 years on Tuesday in a historic move that came as part of a return of its monetary policy to normalcy, signaling its readiness to take further tightening measures as it focuses on curbing price pressures stemming from the energy shock caused by the Iran war.

Policymakers, however, have offered few indications of when the next interest rate hike might occur.

“Although the press conference... included some optimistic signals about the outlook for the Japanese economy, it did not significantly change market expectations about when the Bank of Japan’s next policy move will come,” said Jane Foley, a currency trader at Rabobank.

She added, "Despite the importance of the Bank of Japan's decision to return the interest rate to one percent today, it was overshadowed by the Federal Reserve meeting."

The Australian dollar was last trading at $0.7063 .

The Reserve Bank of Australia kept its key interest rate unchanged at 4.35 percent on Tuesday, citing a slowing economy but warning that it could raise rates again if necessary to control inflation.

The New Zealand dollar fell 0.12 percent to $0.5825.