The dollar come off day highs but remained well supported amid firm expectations of US rate hikes after the Fed's last rate-setting meeting came in decidedly on the hawkish side. The minutes of the Sept 20 meeting, at which the benchmark rate was lifted by a quarter point to 3.75 pct, showed concerns about rising inflationary pressures. The dollar continues to find support as a high yielding, safe haven currency, said Divyang Shah at IDEAglobal.com The Fed has been slowly removing its accommodative monetary policy, having lowered its benchmark rate steadily after the September 11, 2001 terrorist attacks on New York. As things stand, markets believe there will be another two quarter-point hikes in the remaining meetings this year, taking the benchmark rate to 4.25 pct. However, these rises appear to be priced in to the dollar's current exchange rate, making it hard for the currency to rise further. Tonight, Fed chief Alan Greenspan will have the chance to crank up the rhetoric when he speaks about economic flexibility before the National Italian American Foundation. If that fails to lift the dollar, evidence of rising price pressures in US inflation data for September due out on Friday might do the job. The CPI measure is expected to rise 0.9 pct in September as the first full impact of Katrina is seen. Core CPI, meanwhile is expected to rise 0.3 pct. Ahead of that, however, the dollar faces the hurdle of US trade data for August, due out tomorrow, which some believe will show a wider deficit. While a widening in the gap is still possible, there may be an offsetting factor in the form of insurance payments for the damage caused by Hurricane Katrina, said Steve Pearson at HBOS. "The speed of this transfer is surprising, but given that the money appears to have left the UK there is a reasonable risk that it shows up as a boost to US service sector exports, offsetting the impact of higher energy costs on the headline trade number," warned Pearson. In Japan, the Bank of Japan's decision to keep monetary policy unchanged this month did not hamper talk that the current 'super loose' policy will change in the coming year. It did however weigh on the yen which slipped to a 17 month low against the dollar. The Bank of Japan reiterated that the Japanese economy continues to recover, while governor Toshihiko Fukui said the central bank could end its super-loose monetary policy before the coming April. Elsewhere, sterling was propped up by fairly hawkish comments from the Bank of England's governor Mervyn King although gains were tempered by evidence of a softening housing market. In his speech to the Confederation of British Industry last night, King acknowledged that the UK economy has been weaker than expected but downplayed the policy implications of this slowdown. The job of the rate-setting Monetary Policy Committee is not to stabilise output, he added.