FOREX-Dollar holds near 3-week high as bets on sharp U.S. rate cut drop

* Markets reprice chance of big Fed cut after jobs data
* Turkey's lira plunges after dismissal of cenbank governor
* Sterling falls towards $1.25, close to six-month low
* Graphic: World FX rates in 2019 http://tmsnrt.rs/2egbfVh

By Tommy Wilkes
LONDON, July 8 (Reuters) - The dollar held near three-week
highs in early trading on Monday, holding on to its gains after
last week's strong U.S. jobs data lowered expectations for a
sharp Federal Reserve interest rate cut.
Elsewhere, the Turkish lira fell sharply after President
Tayyip Erdogan dismissed the central bank governor, sparking
worries about the bank's independence. U.S. non-farm payrolls rebounded in June to 224,000, the
most in five months, data showed on Friday, beating economists'
consensus estimate of 160,000. The solid outcome virtually wipes out chances for a half
point Fed rate cut at the end of July, but modest wage gains and
other data showing the world's largest economy was losing steam
could still encourage the central bank to cut rates by 25 basis
points.
"We still expect the Fed to deliver a 25 basis point rate
cut this month. The underlying trend for employment growth is
still weakening," MUFG analysts wrote in a research note.
"Nevertheless, the US dollar should continue to trade on a
firmer footing in the near-term given downside risks from a
larger rate cut have diminished."
The dollar index stood at 97.229 .DXY in early London
trading, below the near 3-week high of 97.443 it hit on Friday.
The greenback's rebound follows a period of weakness as
mounting expectations for Fed rate cuts weighed on the currency.
The euro, which dropped to $1.1208 EUR=EBS on Friday,
traded at $1.1225, unchanged on the day.
The common currency came under pressure on Friday after data
showed that German industrial orders fell far more than expected
in May. Traders' focus quickly shifted to Federal Reserve Chairman
Jerome Powell's Congressional testimony, due on Wednesday and
Thursday, as well as U.S. inflation data out later this week.
The British pound hit a six-month low to the dollar on
Friday, after poor economic data and a rise in expectations that
the Bank of England will cut interest rates.
It was last quoted at $1.2513 GBP=D3 , down 0.2% on the
day.
The Turkish lira slid to as low as 5.8245 to the dollar
TRYTOM=D3 , its lowest in two weeks, in early Asian trade. It
last stood at 5.735, down 1.8% on the day.
"Some naive market participants might still hope that the
new central bank governor will come across as being independent
in a statement announced for this week and at least does not cut
interest rates right away," Commerzbank analysts said.
"That may be the case but does not change the fact that
medium term sensible Turkish monetary policy will not be
possible."
In a written statement on Saturday, new governor Murat Uysal
said he would implement monetary policy instruments
independently with a focus on achieving and maintaining the
primary objective of price stability.
The Japanese currency JPY=EBS strengthened 0.1% to 108.34
yen per dollar, above 3-week lows of 108.64 yen.