FOREX-Dollar ticks lower after Fed's Powell opens door to U.S. rate cut

(Adds analyst quote, updates prices)
By Kate Duguid
NEW YORK, June 4 (Reuters) - The U.S. dollar was modestly
lower on Tuesday after Federal Reserve Chair Jerome Powell
alluded to the possibility of an interest rate cut in the face
of economic risks, including the global trade war.
The U.S. central bank will respond "as appropriate" to trade
- and other - headwinds, Powell said in a brief statement
included as part of a speech on broader monetary policy issues.
Powell said the Fed was "closely monitoring the implications" of
the trade dispute that has, since the Fed's last meeting,
disrupted global bond and equity markets and posed risks to U.S.
and world economic growth. The dollar index .DXY , which measures the greenback
against a basket of six rival currencies, was last 0.09% lower
on the day at 97.057.
"Powell's comments will be seen as slightly dollar negative
but we might not see much of a move today because the greenback
already fell yesterday after (St. Louis Federal Reserve
President James) Bullard. His comments are not as aggressively
dovish as Bullard's yesterday but he does reiterate the same
concerns: trade tensions and low inflation," said John Doyle,
vice president of dealing and trading at Tempus, Inc.
The dollar fell on Monday to a five-month low against the
Japanese yen JPY= after Bullard said an interest rate cut "may
be warranted soon," given the rising economic risk posed by
global trade tensions, as well as tame U.S. inflation. The yen
was last at 108.05, roughly unchanged from the prior session.
"We are likely seeing the beginning of coordinated Fed-speak
to prep market participants for at least one rate cut this
year," said Doyle.
The economic consequences of the trade war were seen in a
survey on Monday that showed a measure of national factory
activity dropped to a 31-month low in May. On Tuesday, the
Commerce Department reported that new orders for U.S.-made goods
fell in April and shipments dropped by the most in two years,
indicating continued weakness in manufacturing that could
undercut the broader economy. "This is a big reversal from where we were 6 to 8 months ago
when the fear (was) that the Fed was going to raise rates
regardless of economic conditions," said Joseph Sroka, chief
investment officer at NovaPoint Capital.
The pound GBP= climbed from a five-month low on Tuesday
but concerns about a disorderly departure from the EU meant
gains were modest, amid promises from U.S. President Donald
Trump of a "phenomenal" post-Brexit trade deal. It was last
trading up 0.32% at $1.270.