FOREX-Dollar regains footing as bets on aggressive U.S. rate cuts fade

* Graphic: World FX rates in 2019 http://tmsnrt.rs/2egbfVh
* Dollar regains composure as markets reprice chance of Fed
easing
* Traders await Fed Powell's testimony
* Sterling on defensive due to rate cut speculation

By Stanley White
TOKYO, July 9 (Reuters) - The dollar traded near a
three-week high on Tuesday against its peers, as investors
reduced bets on aggressive U.S. interest rate cuts ahead of the
Federal Reserve chairman's testimony to Congress on the economy.
Sterling was pinned near a six-month low versus the dollar
on speculation the Bank of England will soon join other major
central banks in easing monetary policy in response to growing
worries about the global economy and Britain's exit from the
European Union.
Fed chief Jerome Powell's comments in two-day testimony to
Congress beginning on Wednesday will be closely watched to
determine whether traders will continue to pare bets for deep
interest rate cuts, which could help the dollar continue its
rebound against major currencies.
"The dollar is bouncing back, so there are some downside
risks for the euro and cable," said Masafumi Yamamoto, chief
currency strategist at Mizuho Securities in Tokyo.
"There is a risk the Fed will not be as dovish as people
thought. Central banks ahead of the curve in this cycle are
Australia and New Zealand. The Fed is following, but the
European Central Bank and the Bank of England are laggards."
The dollar index .DXY versus a basket of six major
currencies was little changed at 97.374 on Tuesday, which was
close to a three-week high of 97.443 hit on Friday.
The greenback was steady at 108.75 yen JPY=EBS , near a
six-week high of 108.81 yen reached on Monday.
Investors will closely analyse Powell's comments when he
delivers his semi-annual monetary report before Congress to
gauge how far the U.S. central bank will lower interest rates.
A sharp rebound in U.S. job growth in June reduced
expectations that the Fed will cut interest rates by 50 basis
points when it meets at the end of July.
A week ago, the market forecast an 80.1% chance of a
25-basis-point cut, and a 19.9% chance of a 50-basis-point cut,
according to CME Group's FedWatch tool. The chances are now 98%
and 2%, respectively. FEDWATCH
The British pound was last quoted at $1.2515, within
striking distance of $1.2481, its lowest since the "flash crash"
on January 3 when the pound dropped to $1.2409.
Data on UK gross domestic product and industrial output are
due Wednesday, while the Bank of England will release its
financial stability report on Thursday, which could help traders
gauge whether the BoE will take a more dovish view of the
economy.
The euro EUR=EBS traded at $1.1216, near a three-week low
of $1.1207.
The Turkish lira was steady in early trade in Asia after
weakening sharply following President Tayyip Erdogan's dismissal
over the weekend of the central bank governor, sparking worries
about the bank's independence. The lira at one point slid to a two-week low of 5.8245 to
the dollar TRYTOM=D3 and was last quoted at 5.7291.

(Editing by Jacqueline Wong)