FOREX-Dollar on track for biggest 2-day drop this year on dovish Fed

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

By Saikat Chatterjee
LONDON, June 20 (Reuters) - The dollar sank on Thursday and
is on track for its biggest two-day drop this year after the
U.S. Federal Reserve signalled it was ready to cut interest
rates as early as next month.
The Fed joined its global peers such as the European Central
Bank and the Australian central bank this week in signaling that
more policy stimulus is needed to boost growth, sending
relatively higher yielding currencies such as the Australian
dollar to the Korean won rallying. "With global central banks engaged in a battle to weaken
their currencies, there is a rush to high quality currencies
with higher interest rates," said Neil Mellor, a senior currency
strategist at BNY Mellon in London.
The dollar fell 0.3% against a basket of its rivals .DXY
to 96.755. It fell 0.5% to a six-month low against the Japanese
yen JPY=EBS at 107.47.
The greenback came under additional pressure after benchmark
10-year Treasury yields US10YT=RR fell to the lowest in more
than two years.
"Even though the market had anticipated much of what the Fed
said, the dollar's fall was still a relatively large one," said
Daisuke Karakama, chief market economist at Mizuho Bank.
"The main question is no longer if the Fed will cut rates in
July, but whether the easing will be by 25 or 50 basis points."
The overnight drop in global bond yields has boosted rate
cut bets across global markets with money markets pricing in
three rate cuts from the Fed before the end of the year and as
many as five cuts until mid 2020.
Expectations of more rate cuts from the Fed boosted the
Norwegian crown with the currency rallying 0.8% versus the
dollar NOK=D3 and nearly 0.5% against the euro EURNOK=D3
with markets widely expecting the central bank to raise interest
rates at a policy decision.
China's yuan CNY=CFXS rallied to its strongest level in
five weeks amid broad dollar weakness and signs that China and
the United States are returning to the negotiating table in
their trade dispute.