Dollar pares gains after data, Fed meeting in focus

TOKYO, May 2 (Reuters) - The dollar pared gains on Tuesday after data showed that U.S. job openings fell in March while factory orders came in below economists' expectations, a day before the Federal Reserve is expected to hike rates by an additional 25 basis points.

The U.S. Labor Department said that U.S. job openings fell to 9.59 million in March. The U.S. Commerce Department also said that factory orders rose by 0.9% in March, below expectations for a 1.1% gain.

The data comes as investors try to gauge whether the Fed is likely to pause rate hikes when it concludes a two-day meeting on Wednesday, or if further increases are possible if inflation remains high.

“The big question is does the Fed signal that policy is restrictive enough, or provide enough hints for the market to think that we’re not going to require the further tightening of policy,” said Edward Moya, senior market analyst at OANDA in New York.

The dollar index was last up 0.08% at 102.23 after earlier reaching 102.40, the highest since April 11. The euro fell 0.16% against the greenback to $1.0958 and got as low as $1.0940, the lowest since April 21.

The single currency fell earlier on Tuesday after data showed that euro zone banks are turning off the credit taps and a key gauge of inflation is finally falling, boosting the case for a smaller interest-rate increase by the European Central Bank on Thursday.

The ECB has been seen as possibly hiking rates by 50 basis points this week.

The Aussie dollar rose 0.63% to $0.6673, after earlier getting to $0.6717, the highest since April 21.

The currency jumped against the dollar after the Reserve Bank of Australia (RBA) unexpectedly lifted the cash rate to 3.85% and said further tightening may be required to ensure that inflation returns to target in a reasonable time frame.

"I would think the RBA now thinks they need to see a 4 in front of the cash rate before thinking they might be done," said Ray Attrill, head of FX strategy at National Australia Bank.

"Certainly, the data flow since April has been on the strong side," he added. "It's very probable that another one is to come, though whether it's as soon as June remains to be seen."

The yen gained, reversing earlier losses after last week's Bank of Japan decision to maintain ultra-low interest rates.

The dollar fell 0.37% to 136.80 yen, after earlier hitting 137.78, the highest since March 8.

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Currency bid prices at 10:29AM (1429 GMT)