June 21, 2019 / 7:25 PM / a year ago

FOREX-Dollar hits three-month lows on U.S. rate cut bets

    * Euro rises to 3-month high on business data, hopes on trade
    * Dollar index hits 3-month low on bets on U.S. rate cuts
    * Yen briefly touches 5-month peak on Iran-U.S. tensions
    * Fed officials split over how to deal with weak inflation
    * Graphic: World FX rates in 2019 tmsnrt.rs/2egbfVh

 (Updates market action, adds quote)
    By Richard Leong
    NEW YORK, June 21 (Reuters) - The dollar fell on Friday to three-month lows against a basket
of currencies on bets the Federal Reserve would start lowering interest rates, while the yen
rose to a five-month high versus the dollar on growing tensions between Iran and the United
    The greenback's weakness propelled the euro to three-month highs. The single
currency was also buoyed by stronger-than-forecast survey data on French and German business
    The dollar extended its losses for three straight sessions since the Federal Reserve on
Wednesday signaled it was prepared to lower interest rates later this year.
    The Fed and the European Central Bank this week hinted they were open to ease policies to
counter a global economic slowdown, exacerbated by global trade tensions.
    "Now it's going to be a horse-race between the Fed and ECB on policy easing," said Ed
Al-Hussainy, senior rates and currency analyst at Columbia Threadneedle Investments in
    The focus now shifts to whether Washington and Beijing can resolve their trade dispute at a
summit in Japan next week of leaders from the Group of 20 leading world economies. 
    U.S. President Donald Trump and Chinese President Xi Jinping are due to meet at the G20 next
weekend, but analysts say chances of a decisive breakthrough are low.
    The greenback was 0.67% lower at $1.1368 per euro after touching $1.1334, the lowest since
March 22.
    Against a basket of currencies, the dollar was 0.42% lower at 96.219 after hitting
96.204, the lowest since March 21.
    The dollar enjoyed a brief respite on news of stronger-than-forecast sales in U.S. existing
homes in May.
    The encouraging news offset IHS Markit data that showed manufacturing growth weakened to its
most sluggish level since September 2009 in June, while services sector activity slumped to its
lowest level since February 2016.
    Friday's U.S. data did not change traders expectations the Fed would lower key lending
rates, as early as July. They priced in the probability policy-makers will have reduced rates by
at least 75 basis points by year-end, based on calculations by CME Group's FedWatch tool on its
interest rates futures.
    Meanwhile, Iran's downing of an unmanned U.S. surveillance drone stoked fears about a
military conflict between the two nations following a spate of attacks on oil tankers in the
Gulf region. 
    An initial wave of safe-haven buying of the yen faded following news that Trump shelved a
missile strike against Iran and preferred dialogue with Tehran, especially over its nuclear
    "The Iranians for their part refused the overture for now, so tensions remain high, but the
risk of conflict appears to have eased," said Boris Schlossberg, managing director of FX
strategy at BK Asset Management in New York.
    The yen moved to 107.045 per dollar during Asian trading, which was its strongest
level since Jan. 3. It was last down 0.08% at 107.4 yen per dollar.
    Currency bid prices at 1504 EDT (1904 GMT):
 Description      RIC         Last      U.S. Close  Pct       YTD Pct     High Bid    Low Bid
                                        Previous    Change     Change                 
 Euro/Dollar      EUR=        $1.1367   $1.1291     +0.67%    -0.89%      +1.1370     +1.1283
 Dollar/Yen       JPY=        107.3700  107.2900    +0.07%    -2.62%      +107.7300   +107.0600
 Euro/Yen         EURJPY=     122.06    121.15      +0.75%    -3.30%      +122.1100   +120.9600
 Dollar/Swiss     CHF=        0.9769    0.9818      -0.50%    -0.46%      +0.9838     +0.9766
 Sterling/Dollar  GBP=        1.2736    1.2699      +0.29%    -0.16%      +1.2739     +1.2644
 Dollar/Canadian  CAD=        1.3210    1.3189      +0.16%    -3.13%      +1.3229     +1.3162
 Australian/Doll  AUD=        0.6926    0.6922      +0.06%    -1.74%      +0.6938     +0.6904
 Euro/Swiss       EURCHF=     1.1103    1.1084      +0.17%    -1.34%      +1.1126     +1.1076
 Euro/Sterling    EURGBP=     0.8922    0.8889      +0.37%    -0.67%      +0.8945     +0.8884
 NZ               NZD=        0.6582    0.6585      -0.05%    -2.01%      +0.6604     +0.6555
 Dollar/Norway    NOK=        8.5029    8.5537      -0.59%    -1.59%      +8.5777     +8.5005
 Euro/Norway      EURNOK=     9.6635    9.6607      +0.03%    -2.45%      +9.6929     +9.6521
 Dollar/Sweden    SEK=        9.3522    9.4147      +0.05%    +4.33%      +9.4267     +9.3512
 Euro/Sweden      EURSEK=     10.6306   10.6250     +0.05%    +3.57%      +10.6420    +10.6120
 (Additional reporting by Tommy Wilkes in London 
Editing by Gareth Jones, Alistair Bell and Tom Brown)
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