FOREX-Dollar crumbles to new lows vs euro, yen on U.S. rate cut bets

* Euro hovers around $1.14, hits new 3-month high
* Yen rises above 107 vs dollar, highest since January
* Analysts divided on whether dollar weakness will last
* Graphic: World FX rates in 2019 http://tmsnrt.rs/2egbfVh

(Adds new analyst quote, details, latest prices)
By Tommy Wilkes
LONDON, June 25 (Reuters) - The U.S. dollar fell to a
three-month low against the euro and dropped to its weakest
against the Japanese yen since early January as the prospect of
monetary easing by the Federal Reserve knocked demand for the
U.S. currency.
The euro hit a three-month high of $1.1412 EUR=EBS , having
gained 2.0% from a two-week low of $1.1181 touched a week ago.
It last stood at $1.1382, down 0.1% on the day.
The dollar dropped 0.4% to as low as 106.78 JPY=EBS ,
having only fallen below 107 yen per dollar in the January flash
crash and then last back in April 2018.
The yen has also benefited from investor nerves over
tensions between the United States and Iran. Tehran said on
Tuesday that U.S. sanctions permanently closed the path to
diplomacy between the two countries. Selling in the dollar has accelerated since the U.S. Federal
Reserve signalled last week it would cut interest rates before
year-end on mounting worries about an economic slowdown and the
fallout from tariff wars between the United States and China.
U.S. 10-year Treasury yields US10YT=RR again fell below 2%
in earlier trading, reducing the interest rate advantage the
dollar has enjoyed over rivals in recent years.
"We expect the Fed's pre-emptive cuts to temporarily weigh
on the USD, especially versus G10 currencies, as the U.S. rates
advantage compresses amid an environment of slowing global
growth," said Marvin Barth, foreign exchange strategist at
Barclays.
"However, the Fed's ability to support an extended U.S.
expansion stands in contrast to clear sustained slowing – and
rising risks – in China and Europe, implying a USD rebound in
2020."
The dollar index .DXY fell to a three-month low of 95.843,
having lost 1.7% during the latest five sessions, and was last
down 0.1% at 95.909.
The yen also rallied against the euro, adding 0.4% to 121.82
yen EURJPY=EBS , while versus the British pound it was 0.2%
ahead at 136.45 yen GBPJPY=EBS .
"Yen strength has been encouraged overnight by more
risk-averse trading conditions in response to building concerns
both over slowing global growth and rising geopolitical tensions
between the U.S. and Iran," MUFG analysts said in a note.
Fed Chairman Jerome Powell was due to speak later on
Tuesday.
Investors are waiting to see whether U.S. President Donald
Trump and Chinese President Xi Jinping will at least call a
truce in their trade war when they meet at a summit of the G20
major economies in the Japanese city of Osaka late this week.
Trump considers his meeting with Xi an opportunity to
"maintain his engagement" and see where China is on their trade
dispute, a senior U.S. official said on Monday. Elsewhere, sterling benefited from the broad dollar
weakness, rising to $1.2754 GBP=D3 , up 0.1% on the day.
However the pound is likely to remain under pressure because
of Brexit concerns, with eurosceptic Boris Johnson the
frontrunner to become the next leader and prime
minister. The euro was 0.3% firmer against the Swiss franc at 1.1108
francs EURCHF=EBS , off almost 2-year lows of 1.1057 francs
touched last week.

(Editing by Gareth Jones)