* Graphic: World FX rates in 2019 http://tmsnrt.rs/2egbfVh
By Saikat Chatterjee
LONDON, July 18 (Reuters) - The dollar slipped for a second
day against its rivals on Thursday on the back of softer U.S.
Treasury yields after weak housing data as investors geared up
for a policy meeting next week where officials are set to cut
interest rates for the first time in a decade.
While expectations of a 25 basis point rate cut are firmly
baked into money markets, some investors are gunning for a 50
basis point cut. The Fed is widely expected to cut a total by
nearly 75 basis points by the end of the year.
"We are certainly seeing more concrete signals emerge from
both the Fed and the ECB in terms of easing policy and only the
question is how much will the Fed cut next week," said Ulrich
Leuchtmann, the head of currency research at Commerzbank.
Against a basket of its rivals .DXY , the dollar edged 0.1%
lower to 97.09.
Morgan Stanley strategists said in a daily note that the
overall outlook for riskier assets remained bearish thanks to
disappointing U.S. earnings reports and weak prospects for
global trade.
"All this gives strong reason for the current
internationally-focused Fed to consider cutting rates by 50 bps
at the end of the month," they said. A 50 basis point cut would
weaken the dollar sharply, particularly against high-yielding
currencies, they said.
Despite the growing expectations of a U.S. interest rate
cut, the euro has been hemmed in a narrow trading range in
recent days around the $1.12 level as investors expected the
European Central Bank to follow in the Fed's footsteps.
Money markets are currently assigning a 50% probability of a
10 basis points rate cut next week at a scheduled meeting.
AUSSIE UP
The weakness in the dollar pushed other currencies higher.
The Australian dollar led gainers thanks to a solid jobs report.
Australian employment rose by a surprisingly small 500
positions in June, but all the weakness was in part-time work
with full-time jobs rising by 21,100. The unemployment rate held
steady at 5.2% for a third month running. The Aussie AUD=D4 was 0.3% higher at $0.7031.
"The Australian dollar drew a significant part of its
support from the June underemployment rate, which fell to 8.2%
from 8.6%," said Masafumi Yamamoto, chief forex strategist at
Mizuho Securities in Tokyo.
He said the underemployment rate had a higher correlation
with policy rates and wages than the jobless rate and was likely
to attract more attention in the future.
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