FOREX-Dollar recovers after walk-back of dovish Fed comments

* Graphic: World FX rates in 2019 http://tmsnrt.rs/2egbfVh

(Recasts, new throughout; adds analyst quotes; changes
dateline, previous LONDON)
By Kate Duguid
NEW YORK, July 19 (Reuters) - The U.S. dollar rose in early
trading on Friday, swinging back into positive territory after
the New York Federal Reserve walked back dovish comments from
its president the prior day, which had bolstered expectations of
an aggressive interest rate cut this month.
At a conference on Thursday, New York Fed President John
Williams argued for pre-emptive measures to avoid having to deal
with too-low inflation and interest rates. The dollar dropped before rebounding after a New York Fed
representative subsequently said Williams' comments were not
about immediate policy direction.
Williams has "reassured markets that his comments were
academic and not about immediate policy changes and the dollar
has modestly recovered as a result," said Joshua Tadbir,
corporate hedging manager at Western Union Business Solutions.
Investors are now pricing in a 43.1% chance of a 50-basis
point cut in U.S. rates later this month, according to CME
Group's FedWatch tool, easing off the 60.2% probability hit on
Thursday. The dollar has held up reasonably well as investors
bet other central banks also will ease policy.
The dollar remains sensitive to any Fed news "as traders are
positioned for at least three rate cuts by year-end including
the 25-basis point cut that is fully priced into the market this
month. Should these probabilities change, as a result of the Fed
potentially indicating a one-and-done attitude this month, then
the dollar could rapidly appreciate as the futures market
re-positions," said Tadbir.
The dollar index .DXY , which hit a two-week low of 96.648
on Thursday, was 0.26% higher at 97.042.
The euro fell against the rebounding U.S. dollar on Friday
and hit a 2-year low versus the Swiss franc, as investors ramped
up bets for a European Central Bank interest rate cut as early
as next week.
Money markets are now pricing in a roughly 60% chance of a
10-basis point rate cut next week, versus a 40% chance earlier
in the week. The euro was 0.39% lower at $1.123 EUR= .
Against the Swiss franc it touched a two-year low of 1.103
francs per euro EURCHF= , down 0.41% on the day. The franc,
viewed as a safe haven, has benefited as investors grow nervous
about the euro zone economic outlook.
The Japanese yen, also a safe haven, dropped against the
dollar, falling 0.35% to 107.64 JPY= .