July 3, 2019 / 1:23 PM / in 18 days

FOREX-Dollar falls to one-week low vs yen on Fed rate cut bets

    * Dollar index nudged off 2-week highs
    * Global bond yields fall on dovish central banks
    * U.S. private sector jobs data was lower than expected
    * U.S. jobless claims fall, trade gap widens
    * Graphic: World FX rates in 2019 tmsnrt.rs/2egbfVh

 (Updates prices, adds U.S. data, new comment, FX table, changes
byline, dateline; previous LONDON)
    By Gertrude Chavez-Dreyfuss
    NEW YORK, July 3 (Reuters) - The dollar slipped to a
one-week low against the Japanese yen on Wednesday, undermined
by the steady fall in U.S. Treasury bond yields, fading optimism
over the China-U.S. trade deal, and the possibility of fresh
tariff hostilities with Europe.
    Volume was light ahead of the U.S. Independence Day holiday
on Thursday.
    U.S. economic reports on Wednesday were mixed and did not
really change the dollar's trading direction.
    Data from payrolls processor ADP showed U.S. companies added
102,000 private sector jobs in June, much higher than the
revised 41,000 jobs in May. But the June figure was lower than
the 140,000 analysts had forecast. 
    Paul Ashworth, chief U.S. economist at Capital Economics,
said the ADP report suggests the deterioration in the broader
economy has spread to the labor market. 
    "Even with the U.S.-China trade talks back on track, for now
at least, the evidence of a slowdown in employment growth should
still be enough to persuade the Federal Reserve to cut rates in
either July or September, but expectations of a 50 basis-point
cut seem misplaced," he added.
    Wednesday's data also showed U.S. weekly jobless claims fell
more than expected to a seasonally adjusted 221,000, while the
U.S. trade deficit in May widened to $55.5 billion from April's
revised $51.2 billion.
    In mid-morning trading, the dollar dipped 0.1% against the
yen to 107.75, after earlier falling to a one-week low of 107.54
.
    The dollar-yen pair has become more sensitive to trade
developments. Investors have grown more skeptical about the
possibility of a speedy resolution to the trade war, especially
given U.S. President Donald Trump's comments that any deal would
have to be tilted in favour of the United States.
    Against a basket of six currencies, the dollar eased from
Tuesday's two-week highs  to trade little changed on
Wednesday at 96.736. The index earlier fell as bond yields
extended the previous day's decline, with 10-year yields hitting
2-1/2-year lows below 1.94%.
  
    WEAK DOLLAR
    Expectations have grown that the Fed will embark on its
first rate cut in a decade at a policy meeting this month.
Markets are assigning a more than a 70% probability of a quarter
point rate cut at the next policy meeting.
    The euro, meanwhile, was little changed at $1.1283
following a volatile session on Tuesday. 
    The common currency briefly got a lift on Tuesday after a
media report that European Central Bank was in no rush to cut
rates at the July meeting. But it later slipped after IMF
Managing Director Christine Lagarde, perceived as a policy dove,
was nominated as the next ECB president.
    
    ========================================================
    Currency bid prices at 9:09AM (1309 GMT)
 Description      RIC         Last           U.S. Close  Pct Change     YTD Pct     High Bid    Low Bid
                                              Previous                   Change                 
                                              Session                                           
 Euro/Dollar      EUR=        $1.1284        $1.1283     +0.01%         -1.61%      +1.1299     +1.1269
 Dollar/Yen       JPY=        107.7800       107.8800    -0.09%         -2.25%      +107.9200   +107.5400
 Euro/Yen         EURJPY=     121.64         121.74      -0.08%         -3.63%      +121.8300   +121.3200
 Dollar/Swiss     CHF=        0.9855         0.9861      -0.06%         +0.42%      +0.9872     +0.9836
 Sterling/Dollar  GBP=        1.2572         1.2591      -0.15%         -1.45%      +1.2601     +1.2558
 Dollar/Canadian  CAD=        1.3068         1.3104      -0.27%         -4.17%      +1.3119     +1.3066
 Australian/Doll  AUD=        0.7017         0.6994      +0.33%         -0.45%      +0.7024     +0.6986
 ar                                                                                             
 Euro/Swiss       EURCHF=     1.1122         1.1128      -0.05%         -1.17%      +1.1135     +1.1109
 Euro/Sterling    EURGBP=     0.8974         0.8959      +0.17%         -0.11%      +0.8987     +0.8960
 NZ               NZD=        0.6691         0.6671      +0.30%         -0.40%      +0.6692     +0.6671
 Dollar/Dollar                                                                                  
 Dollar/Norway    NOK=        8.5554         8.5646      -0.11%         -0.96%      +8.5949     +8.5485
 Euro/Norway      EURNOK=     9.6551         9.6668      -0.12%         -2.53%      +9.6901     +9.6565
 Dollar/Sweden    SEK=        9.3114         9.3278      -0.20%         +3.88%      +9.3636     +9.3018
 Euro/Sweden      EURSEK=     10.5090        10.5302     -0.20%         +2.39%      +10.5565    +10.4890
 
    
 (Reporting by Gertrude Chavez-Dreyfuss; Additional reporting by
Sujata Rao in London
Editing by Chizu Nomiyama)
  
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