FOREX-Dollar clings to gains as Gulf tensions bolster safe-haven bid

* Euro, pound mark time ahead of ECB meet, UK PM vote
* Gulf crisis turns sentiment to risk-off
* Dollar steady at 107.73 yen, dollar index unmoved

By Tom Westbrook
SYDNEY, July 22 (Reuters) - The dollar held recent gains on
Monday as investors tempered some of their expectations for deep
U.S. interest rate cuts this month and heightened Middle East
tensions supported safe-haven assets.
While currency market focus will mostly centre on global
central bank decisions scheduled for the next two weeks,
investors are also watching for any developments in U.S.-China
trade negotiations.
Markets generally expect central banks to either cut rates
or keep policy accommodative, starting with the European Central
Bank (ECB) which meets on Thursday followed by the Bank of Japan
and the U.S. Federal Reserve next week.
"A series of central bank events in the last several weeks
have inflated monetary expectations," analysts at JPMorgan Chase
& Co said in a note. "The moment of truth is now around the
corner as central banks will be forced to unveil their policy
intentions."
The dollar hovered at levels it hit on Friday, around 107.73
yen JPY= , but was trapped in the middle of a 107-109 range
where it has traded for a month.
The dollar index .DXY , which measures the greenback
against a basket of six major currencies, was barely changed at
97.147 after gaining 0.35% last week.
The euro was flat EUR=D3 at $1.1217, after declining 0.4%
last week.
Confrontation in the global oil trade's most important
waterway has escalated with footage showing the Iranian military
defying a British warship when it seized a tanker in the Strait
of Hormuz on Friday. That lifted oil prices and kept the dollar close to where it
left after volatile trade on Friday when the New York Federal
Reserve walked back dovish comments from its president. O/R
"The Fed's position helped the USD firm," ANZ bank
strategist Sandeep Parekh said in a note on Monday morning.
"Escalating tension in the Persian Gulf is likely to weigh on
risk sentiment in the near term."
New York Fed President John Williams had last week sent the
dollar tumbling after a speech where he argued for pre-emptive
stimulus.
But a subsequent clarification that his remarks were
academic and "not about potential policy actions" shredded
expectations for a 50-basis-point interest rate cut at the end
of the month and lifted the currency higher.
Expectations for a rate cut of half a percentage point at
the Fed's July 30-31 meeting edged out further on Monday to hit
14.5%, according to CME's FedWatch tool, down from as high as
71% last week.
Markets still see it as a certainty the Fed will cut rates
by at least a quarter of a percentage point at the meeting.
In Asia, investor focus remains on China as Beijing and
Washington to end a protracted trade war. A report over the
weekend by China's official Xinhua news agency suggested some
local firms were seeking to buy U.S. farm products, seen by some
as a possible sign of progress.
Elsewhere, investors are waiting to see if Boris Johnson
will win the British Conservative Party's leadership ballot. The
pound GBP=D3 held around $1.2507, staying on a slippery slope
since mid-March largely led by political uncertainty in the
country.