FOREX-Australian dollar defies broader risk rally as RBA cut looms

* Graphic: World FX rates in 2019 http://tmsnrt.rs/2egbfVh
* RBA expected to cut rates to a record low
* Traders looking for clues on additional rate cuts
* Greenback bounces but caution could set in before payrolls

TOKYO, July 2 (Reuters) - The Australian dollar nursed
wounds on Tuesday, a day after it posted its biggest one-day
fall in more than two months ahead of an expected central bank
easing while improved risk appetite supported the greenback.
The dollar index against a basket of six major currencies
remained near its highest in a week as sentiment picked up
following an agreement between the United States and China to
resume talks to resolve their trade war.
That left the euro mired at its lowest level in more than a
week as disappointing economic data triggered a tumble in bond
yields and boosted expectations for a central bank rate cut in
the common currency bloc. In the Asian session, investor focus has shifted to the
Reserve Bank of Australia (RBA), which is tipped to lower
interest rates by 25 basis points to a record low of 1.00% at a
meeting later on Tuesday.
RBA Governor Philip Lowe will also speak to business leaders
in Darwin after the meeting, which could provide clues on how
much further interest rates could fall. A Reuters survey showed
economists see a chance of another cut to 0.75% by year end.
"Lowe is speaking in Darwin, and that is really where the
market will be looking for clues... but our view is we will get
at least one more follow-up cut," said Ray Attrill, head of FX
strategy at National Australia Bank in Sydney.
"The other story is the revival in the U.S. dollar's
fortunes, which has surprised me a little bit, but you have the
juxtaposition of Treasury yields backing up and new record lows
from European yields."
The Australian dollar AUD=D4 was little changed at $0.6965
after slumping 0.9% on Monday, its biggest decline since April
24. The Aussie could dip below $0.6950 after the RBA's decision
around 0430 GMT but would likely stabilise as traders await
Lowe's comments expected 0930 GMT, Attrill said.
The U.S. dollar index .DXY was up 0.5% at 96.809 on
Tuesday, having posted its biggest gain since March 7 on Monday,
bolstered by optimism over U.S.-China trade talks.
The focus now shifts to U.S. non-farm payrolls data due on
Friday, which economists expect to have risen by 160,000 in
June, compared with a 75,000 increase in May.
However, analysts expect the dollar will struggle to make
substantial additional gains given expectations the Federal
Reserve will cut rates due to low inflation and worries about
the U.S.-China trade war.
The euro EUR= limped into Asian trading on Tuesday,
changing hands at $1.1286. The common currency fell 0.7% on
Monday, its biggest-one day decline since March.