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

(Updates to Asia afternoon)

* Fed decision awaited, probably the last with Jerome Powell as chair

* US-Iran talks to end the war at an impasse, keeping markets nervous

* Traders on alert for intervention as yen nears 160 level

By Rae Wee

SINGAPORE, April 29 (Reuters) - The dollar edged higher on Wednesday as investors awaited a closely watched Federal Reserve rate decision in what was likely to be Chair Jerome Powell's swan song against a backdrop of war in the Middle East that shows little sign of an imminent resolution. 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 to come this week. Against the dollar, the euro dipped 0.07% to $1.1705 while sterling slipped 0.05% to $1.3513, as both currencies edged further away from their highs earlier this month. The Fed's policy decision later in the day takes centre stage, with the central bank widely expected to keep rates on hold, though the focus will be on its assessment of the war's impact on the economy and on 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 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 steadied at 98.68. The Canadian dollar was little changed atC$1.3685, ahead of the Bank of Canada's rate decision also due on Wednesday.

In geopolitics, efforts to end the Iran war were at an impasse with U.S. President Donald Trump unhappy with the latest proposal from Tehran because he 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, signalling a strong chance of a rate hike in coming months. Against the dollar, the Japanese currency was little changed at 159.63, 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 fuelling 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." Traders remain 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 was down 0.26% at $0.7164, having fallen slightly in the wake of domestic inflation data, which showed persistent price pressures though the key trimmed mean measure of core inflation came in just under forecasts. The New Zealand dollar declined 0.4% to $0.5862.

New Zealand's top central banker on Wednesday said that measures of core inflation in the first quarter had stayed stable within its target band of 1% to 3%, adding that the bank remained focused on controlling inflation while supporting an economic recovery.

(Reporting by Rae Wee; Editing by Sam Holmes and Kate Mayberry)