Despite the day's small gains in the dollar, sentiment was still bearish for the currency on expectations that its interest rate advantage is set to narrow, traders said. The Fed is widely expected to lift its funds rates for the 16th straight time to 5 percent from the current 4.75 percent this week. But traders are uncertain about the Fed's action beyond that and are eager to see if the central bank hints at a pause in the current tightening cycle in its post-meeting statement. Traders said the market was also focusing on the U.S. Treasury's report on currency practices of trading partners due on Wednesday, with expectations in some quarters that the government might name China as a currency manipulator. Analysts said that such an action by the United States could trigger further dollar selling against the yen -- seen as a proxy for China's yuan. Timothy Adams, the U.S. Treasury's undersecretary for international affairs, said last week that it was appropriate Japan had not intervened to keep the yen from strengthening since March 2004 but "we should all refrain" from commenting on exchange rates. The remarks were seen by many in the market as a signal that Washington wants the dollar to weaken against the currencies of countries with hefty trade surpluses, especially in Asia, as a way to help fix global imbalances. The Group of Seven economic powers last month called for countries with trade surpluses to allow more currency appreciation, singling out China and Asia. Japanese Finance Minister Sadakazu Tanigaki said on Tuesday that excessive movements in the foreign exchange market were undesirable but declined to comment on Japan's forex intervention policy.