FOREX-Dollar steady as investors brace for Fed decision in face of war

* Fed decision awaited, likely last under Chair Powell's leadership

* US-Iran talks to end the war in stalemate, keeping markets nervous

* Traders on alert for yen intervention risks as yen nears 160 level

By Rae Wee

SINGAPORE, April 29 (Reuters) - The dollar firmed on Wednesday as investors awaited a closely watched Federal Reserve rate decision in what was likely to be Chair Jerome Powell's swan song, with war in the Middle East raging and hopes for an imminent resolution dimming.

Currencies held tight ranges in thinned Asia trade, with markets in Japan closed for a holiday and a slew of major central bank decisions still on deck.

Against the dollar, the euro last bought $1.1716 while sterling was little changed at $1.3523, as both currencies edged further away from their highs hit earlier this month.

The Fed's policy outcome due later in the day takes centre stage, with the central bank widely expected to stand pat on rates, though the focus will be on its assessment of the war's impact on the economy and on Chair Powell's future.

"The question is what Powell is going to do, because he still holds the governor seat until 2028, so whether he chooses to resign after the expiry of the Chair term or if he stays on as a governor and as sort of a shadow Chair," said Carol Kong, a currency strategist at Commonwealth Bank of Australia.

"Powell has previously said that he will stay on if he thinks that the Fed independence is under threat, so I think his decision... will depend on his perception of Fed independence."

Against a basket of currencies, the dollar held to a small overnight gain and steadied at 98.57. The Canadian dollar strengthened slightly to C$1.3676, ahead of the Bank of Canada's rate decision also due on Wednesday.

On the geopolitics front, efforts to end the Iran war were at an impasse with Donald Trump unhappy with the latest proposal from Tehran, as the U.S. President wants nuclear issues dealt with from the outset.

That kept the market mood fragile and the dollar underpinned by safe-haven demand.

TRADERS ON YEN INTERVENTION WATCH

The yen meanwhile remained on the cusp of 160 per dollar despite a hawkish hold by the Bank of Japan (BOJ) on Tuesday, which signalled a strong chance of a rate hike in coming months.

Against the dollar, the Japanese currency was last little changed at 159.55, having received a marginal lift in the wake of the BOJ's decision.

Governor Kazuo Ueda stressed the bank's readiness to raise rates to prevent the energy shock from fueling broader inflation, as long as any economic slowdown from the Middle East proved moderate.

"If you look at the broader picture here, yes there's a bit of a hawkish hint coming through, (the BOJ) may have hiked if not for the war... but the broader picture here is that, it's still one in which the rate hike that is likely to come is going to be gradual in nature," said Sim Moh Siong, a strategist at OCBC.

"The story for the yen is one in which the downside is capped because we're near to intervention levels, but it's very difficult to get excited about the upside."

As the yen continues to stay on the back foot, traders remained on alert for a potential intervention from Japanese authorities to shore up the currency, with the 160 level often seen as a potential trigger for such a move.

Elsewhere, the Australian dollar held near a four-year high and last bought $0.7187, ahead of domestic inflation data due later in the day.

The New Zealand dollar rose 0.05% to $0.5888.

(Reporting by Rae Wee; Editing by Sam Holmes)