(Updates throughout)
    By Amanda Cooper
       LONDON, March 22 (Reuters) - The dollar held around
five-week lows on Wednesday, before the conclusion of the
Federal Reserve's policy meeting at which investors will be
looking for any insight on what might happen with interest rates
given the turmoil in the banking sector. 
    Markets show a quarter-point rise in U.S. rates is the most
likely outcome, but investors will be keen to hear what Chair
Jerome Powell says about the crisis that has rattled global
banks this month and how carefully the central bank feels it
needs to tread.
    Markets are pricing in about a 15% chance of the Fed not
increasing rates, with a roughly 85% chance of a 25 basis point
hike, according to the CME FedWatch tool. Just a month earlier,
the market was pricing in a 24% chance of a 50 basis point hike.
    "Today's rate hike is priced in and expected and there would
be no reason to not do it," Fiona Cincotta, a strategist with
City Index, said.
    The Fed, together with other major central banks, has made
provisions to grease the wheels of the financial system, after
the failure of several smaller U.S. lenders and the implosion of
Credit Suisse  CSGN.S  at the weekend unleashed huge market
volatility and a rout in banking stocks and bonds in particular.
    Following Credit Suisse's shotgun takeover by UBS  UBSG.S ,
and U.S. authorities and large banks helping prop up some of the
more vulnerable regional institutions, investors are breathing a
little more easily, leading to the dollar losing some of its
safe-haven appeal this week.
    The Fed meeting concludes on Wednesday with the 2 p.m. EDT
(1800 GMT) release of a policy statement followed half an hour
later by a news conference by Powell.
    Christopher Wong, currency strategist at OCBC, said the
focus will be on how the Fed communicates its forward guidance,
in particular "the higher for longer" rhetoric.
    "Ideally, we would like the Fed to go with a 25 basis point
hike this meeting, tone down hawkish guidance and emphasize that
policy decisions at subsequent meetings will continue to be
data-dependent," Wong said. "This wish list should see dollar
trade on the softer profile and risk proxies trade steadily".  
    The pound  GBP=D3  was the strongest performing G10 currency
of the day, with a 0.6% gain versus the dollar after data showed
UK inflation came in much hotter than expected in February,
which puts Bank of England policymakers in a tough position when
they meet on Thursday.
    Markets show traders now fully expect a rise of 25 basis
points, whereas just 24 hours ago, the chances of the bank
raising by a quarter of a point or standing pat were 50/50. 
    "There had been a 50/50 feeling about would they hike or
would they not and that print today has cemented the fact that
they do need to hike tomorrow. But I don't think they will
necessarily be talking about future hikes again," City Index's
Cincotta said.
    The euro was last down 0.4% against sterling at 87.81 pence,
while gaining 0.2% against the dollar to trade at $1.079.
    Meanwhile, the yen  JPY=EBS  was flat around 132.41 per
dollar, while the Australian dollar  AUD=D3  rose 0.4% to
$0.6696, as did the kiwi  NZD=D3 , which rose to $0.622.
    In cryptocurrencies, bitcoin  BTC=  was last up 0.44% at
$28,276.58, but was below the nine-month peak it touched on
Monday.  

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World FX rates    https://tmsnrt.rs/2RBWI5E
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 (Reporting by Ankur Banerjee in Singapore; Editing by
Christopher Cushing, Stephen Coates and Emelia Sithole-Matarise)
 ((ankur.banerjee@thomsonreuters.com;; Mobile - +65 8121 3925;
Twitter: @AnkurBanerjee17;))