* Fed cuts rate by 25 bps as expected but signals a possible pause
* Chile's cancellation as APEC host raises hurdle for US-China deal
* BOJ stands pat, triggers little reactions
* Graphic: World FX rates in 2019 http://tmsnrt.rs/2egbfVh
By Tomo Uetake
TOKYO, Oct 31 (Reuters) - The dollar declined against a basket of major currencies on Thursday, reversing earlier gains, after the Federal Reserve cut interest rates for the third time this year and its signal for a potential pause in the easing cycle was taken with a pinch of salt.
In lowering its policy rate by 25 basis points to a target range of between 1.50% and 1.75%, the U.S. central bank dropped a previous reference in its policy statement that it "will act as appropriate" to sustain the economic expansion - language that was considered a sign for future cuts.
Still, lack of an explicit signal from the Fed that it is done with easing for now was perceived to be less hawkish than expected, helping to drive the dollar down.
"The new, slightly shorter, statement tries to keep their options open and puts them back into a data-dependent mode, but circumstances could mean that they have less optionality than they think," said Tim Foster, portfolio manager at Fidelity International in London.
The dollar index rose to as high as 98.00 as Fed Chairman Jerome Powell spoke about its decision, the highest since Oct. 17, before slipping. The index was last down 0.4% at 97.29, its lowest level in a week.
The euro last changed hands at $1.1165, down 0.1%, while the greenback last traded at 108.66 yen, 0.2% lower on the day.
The dollar was also pressured versus the safe-haven yen by the news that Chile has withdrawn as host of an APEC summit in November where the United States and China had been expected to take major steps toward ending a 15-month-old trade war.
Optimism that the world's largest economies would soon agree on a partial deal has boosted risk appetite this week.
"The fact that Chile has cancelled the mid-November APEC Summit should not be a deal breaker for the U.S. and China to reach a truce," said Tai Hui, Asia chief market strategist at JPMogan Asset Management in Hong Kong.
"If the two sides were genuinely willing to reach an interim deal before mid-December, when the next scheduled hike in tariff on Chinese exports is due to take place, they will find a venue to get the deal done."
The Bank of Japan kept its ultra-easy monetary policy in place as expected and changed its forward guidance to more clearly signal the future chance of a rate cut. Currency markets hardly budged after the BOJ decision.
Traders are now focussing on BOJ Governor Haruhiko Kuroda's press conference later on Thursday to gauge his assessment of the risks posed by the U.S.-China trade war and Brexit.
Sterling edged up after British Prime Minister Boris Johnson won parliamentary approval on Wednesday to hold a general election in December, though moves were limited as large currency options expiring this week curbed volatility.
The pound was trading at $1.2927, 0.2% higher on the day.
The Australian and New Zealand dollars firmed as investors scaled back wagers on local interest rate cuts after the Fed indicated it might be pausing in its easing campaign.
The Aussie gained as much as 0.4% to mark a three-month top of $0.6930, while the kiwi dollar popped up 0.7% to $0.6433, its highest in more than a week.
Westpac economists changed their call on New Zealand interest rates, now expecting no cut at the Reserve Bank of New Zealand's policy meeting on Nov. 13. Traders have also been lengthening the odds on a move from the Reserve Bank of Australia in the near term. (Reporting by Tomo Uetake; Editing by Richard Borsuk & Shri Navaratnam)