FOREX-Dollar pressured, Fed rate hike bets questioned

* Dollar on back foot as Fed rate hike bets questioned

* Euro trims gains on Bini Smaghi comments

* Data on German sentiment, U.S. inflation in focus

(Changes dateline, byline, updates prices, adds quotes)

By Toni Vorobyova

LONDON, June 17 (Reuters) - The dollar fell broadly on Tuesday as investors questioned whether the Federal Reserve would deliver the expected series of interest rate hikes in the face of continued economic weakness.

Traders also scaled back rate hike bets in the euro zone, after European Central Bank Executive Board member Lorenzo Bini Smaghi said a quarter-point rate hike should be enough to bring inflation below the ECB's 2 percent target.

But with the ECB still widely expected to raise rates next month from the current 4 percent, the euro retained the upper hand versus the dollar.

The greenback continued the move lower started on Monday after a weekend Group of Eight meeting issued no joint statement against the weakness of the U.S. currency and data showed manufacturing in New York state contracting in June for the fourth time in five months.

"We had some softer (U.S.) economic news and oil hitting a new high, and it seemed to be taken from the point of view not of inflation concerns but more of a refocus on growth and we saw U.S. yields lower, so there has been a bit of a snap back in the dollar," said Martin McMahon, FX strategist at Credit Suisse in Zurich.

"We certainly don't see the Fed putting on 50-75 basis points this year, so our view is that markets were getting ahead of themselves," he added.

By 0719 GMT the dollar index was down 0.3 percent at 73.461, adding to Monday's 0.7 percent fall .DXY.

Adding pressure on U.S. yields and the dollar were media reports in The Financial Times, The Wall Street Journal and The Washington Post this week that have highlighted that markets may have become too aggressive in their Fed pricing.

By 0732 GMT the euro was 0.3 percent higher at $1.5525, a quarter cent below the session highs hit before the Bini Smaghi comments.

The German ZEW index of economic sentiment for June is due at 0900 GMT.

YEN COMEBACK?

The scaling back of euro zone and U.S. rate hike expectations benefitted the yen as Japan's policy rate is seen remaining at an ultra-low 0.5 percent this year.

"If central banks...are now trying to re-engineer rate expectations to a less aggressive setting, then the yen would likely capitalise on the narrowing of spreads in interest rate futures markets," Calyon said in a research note.

The euro retreated to 167.12 yen EURJPY=, slipping off an earlier 11-month peak of 167.82 yen.

The dollar was down half a percent on the day at 107.62 yen, around a yen bellow four-month highs set on Monday JPY=.

For more clues about the monetary policy paths at the Fed, investors were awaiting U.S. producer prices and housing starts data for May at 1230 GMT.

Traders said the dollar could face more selling if quarterly results from Goldman Sachs (GS.N) due later on Tuesday turn out worse than forecast and remind investors the credit crisis isn't over.

(Editing by Gerrard Raven)