(Updates prices, adds comments)
* Dollar falls vs euro on expected dovish Fed
* Fed to release policy statement Wednesday
* Dollar up vs yen on potentially bigger BOJ stimulus
By Sam Forgione
NEW YORK, April 26 (Reuters) - The U.S. dollar fell against the euro and commodity currencies on Tuesday on expectations for a dovish Federal Reserve statement and greater risk appetite, while the greenback gained against the yen on expectations for increased Bank of Japan stimulus.
The euro was last up 0.24 percent against the dollar at $1.1290 EUR= after U.S. March durable goods orders and April consumer confidence data came in below the expectations of economists polled by Reuters, reinforcing views that weak economic data would lead the Fed to strike a dovish tone in a policy statement on Wednesday.
"Most U.S. data is coming in soft," said Win Thin, global head of emerging market currency strategy at Brown Brothers Harriman in New York. "It's going to be harder for the dollar to get some traction until Fed tightening comes back on the radar."
Fed fund futures contracts on Tuesday suggested traders were pricing in no chance that the Fed would hike interest rates again this month, according to CME Group's (NASDAQ:CME) FedWatch program.
The dollar fell against commodity-linked currencies such as the Canadian and Australian dollars and the Russian ruble on gains in oil prices, which helped fuel greater risk appetite. The dollar was last down 1.48 percent against the ruble, at 65.5436 rubles RUB= .
The dollar turned positive against the yen, however, after weakening against the Japanese currency during morning trading.
"The markets are essentially covering up some long yen positions ahead of the BOJ meeting," said Paresh Upadhyaya, director of currency strategy at Pioneer Investments in Boston. "The markets are starting to price in maybe the BOJ taking more dramatic measures."
Upadhyaya said the dollar could strengthen to 113 yen if more dramatic stimulus measures are announced and markets do not view them as a risk to the Japanese banking sector, while the dollar could weaken to below 110 yen if the increased measures are viewed as not significant enough.
The BOJ introduced negative rates earlier this year and has run a quantitative and qualitative easing (QQE) program since April 2013, but these measures have so far failed to generate the inflationary pressures needed to reach the central bank's 2 percent inflation target by the first half of fiscal 2017.
The dollar was last up 0.2 percent against the yen at 111.41 yen JPY= .
The U.S. dollar index .DXY , which measures the greenback against a basket of six major currencies, was last down 0.29 percent at 94.566.