The dollar was steady ahead of tomorrow's US interest rate decision, with trading remaining cautious and confined to tight ranges

The Federal Reserve is fully expected to raise interest rates by a quarter point tomorrow to take the fed funds target rate to 1.75 pct. Investors will therefore be keeping a close eye on the accompanying statement for indications as to whether there will be a further hike at the November meeting

"With the FOMC meeting still one day away, the US dollar is likely to remain bid," said Margaret Browne, currency analyst at HSBC. The market is expecting not only a 25 basis point hike, but also a more upbeat statement than in August, she said

Most analysts expect to see the Fed maintain its upbeat assessment on the US economy and to further reinforce Fed chairman Alan Greenspan's view that the economy is regaining traction

UBS analyst Mansoor Mohi-uddin said he expects the Fed to indicate that inflationary expectations have moderated, but that growth has gained further traction

"This suggests the Fed will keep its tightening bias while continuing to remind the market that future rate hikes will only occur at a measured pace," he said

On the other hand, any hint that the Fed may take a pause from raising interest rates in November is likely to spook the market and will be bad news for the dollar, analysts said

Elsewhere, sterling stabilised in afternoon trade after falling earlier in the day in the wake of a series of data showing a slowing in UK mortgage lending in August -- further evidence that the housing market is cooling as higher interest rates take their toll

The market will now be looking to the latest housing market survey by the Royal Institute of Chartered Surveyors, due out early tomorrow, for further indications on the housing market. The main focus of the week for the pound, however, will be Wednesday's release of the Bank of England Monetary Policy Committee's minutes from the September meeting, when rates were left on hold at 4.75 pct

The MPC is expected to have voted unanimously to leave rates on hold, and the market will be watching to see if any discussion arose on the possibility of raising rates

The BoE is expected by most in the market to raise rates just one more time this year, probably in November

The euro was slightly higher meanwhile ahead of a speech tonight by the European Central Bank's chief economist Otmar Issing entitled 'The Euro- A stable currency for Europe'. Wednesday's address by ECB governor Jean-Claude Trichet will also be closely watched

In both speeches, the market will be looking for clues of when European interest rates are likely to start rising again

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