FOREX-Dollar inches up after Fed minutes, Aussie felled by rates and coal woes

* Graphic: World FX rates in 2019 http://tmsnrt.rs/2egbfVh

* Trade issues seen back in focus after release of Fed minutes

* Aussie struck by rate cut forecasts, Dalian port coal import ban

* Pound sags as lawmakers defect from May's party, Fitch warning (Updates moves in Australian dollar)

By Shinichi Saoshiro

TOKYO, Feb 21 (Reuters) - The dollar inched up on Thursday after minutes from the Federal Reserve's last meeting revived expectations for a possible U.S. rate hike this year while the Aussie dollar skidded on policy easing expectatations and a Chinese ban on Australian coal.

The greenback had risen slightly against the yen and trimmed losses versus the euro late on Wednesday after the Fed, in the minutes of its latest meeting in January, said the U.S. economy and its labour market remained strong, prompting some expectations of at least one more interest rate hike this year.

The dollar index against a basket of six major currencies added 0.17 percent to 96.614, crawling away from a two-week trough of 96.286 marked on Wednesday.

The Fed caught markets off guard last month after it took a dovish turn in its commentary, widely read as a sign it would suspend a three-year campaign to raise interest rates.

"The dollar drew some lift as the minutes appeared to have appeased market participants who were clinging to views that the Fed would hike rates one more time this year - but all in all, the minutes were in line with what the Fed said in January," said Daisuke Karakama, chief market economist at Mizuho Bank.

"The market's focal point will now shift back to trade. The U.S.-China trade negotiation deadline could be extended and that may mean Europe and Japan could be faced with trade issues."

U.S. President Donald Trump on Wednesday said the United States would impose tariffs on European car imports if it cannot reach a trade deal with the European Union.

The dollar was a shade weaker at 110.735 yen after rising 0.25 percent overnight.

The euro was little changed at $1.1331 after being nudged off a two-week high of $1.1371 scaled earlier on Wednesday.

SINKING AUSSIE

A big mover in Asia was the Australian dollar, which was last down 0.95 percent at $0.7095 in a volatile trading session.

The Aussie rallied early in the session to a two-week peak of $0.7207 on strong domestic January employment data. But it quickly lost altitude, with traders attributing the drop to interest rate cut forecasts made by Westpac.

The antipodean currency suffered a further hit after customs at China's northern Dalian port banned imports of coal from major supplier Australia.

The indefinite ban on coal imports from Australia, effective since the start of February, comes as major ports elsewhere in China prolong clearing times for Australian coal to at least 40 days.

Reserve Bank of Australia (RBA) Governor Philip Lowe had sent the Aussie tumbling early in February by stepping back from the central bank's long-standing tightening bias, saying the next move in interest rates could be either down or up.

"It is difficult for the Aussie to keep rising indefinitely when the RBA has seemingly switched to a dovish stance," said Shin Kadota, senior strategist at Barclays.

The New Zealand dollar suffered collateral damage from the slide by its Australian peer, last trading down 0.6 percent at $0.6813.

The pound dipped 0.15 percent to $1.3031 pulling back further from a near three-week high of $1.3109 touched the previous day.

Sterling took a knock after three lawmakers defected from British Prime Minister Theresa May's ruling Conservative party in a move that could undermine her Brexit strategy.

The pound was also weighed after Fitch Ratings said on Wednesday it may downgrade the United Kingdom's "AA" debt rating based on growing Brexit uncertainty. (Editing by Sam Holmes)