* U.S. dollar neutral as investors prepare for Fed meeting
* Australian dollar surges to five-week high against dollar
* Sterling down ahead of parliamentary vote
* Graphic: World FX rates in 2019 http://tmsnrt.rs/2egbfVh
By Olga Cotaga
LONDON, Sept 9 (Reuters) - The euro fell to a five-day low
against the dollar Monday as investors remained convinced the
European Central Bank would introduce a new wave of monetary
policy stimulus at its meeting on Thursday.
Leveraged funds have increased their net short positions on
the euro, expecting the ECB to cut interest rates, announce it
will buy government bonds or other European assets, or both.
Other global central banks are already loosening monetary
policy, including the People's Bank of China, which on Friday
cut the amount of cash that banks must hold as reserves.
"ECB watchers are confident there could be a 20 bps cut and
so the potential surprise (for the euro) on the rate cut isn't
that big," said Esther Maria Reichelt, a Commerzbank (DE:CBKG) analyst.
"It's far more difficult to assess what kind of
unconventional measures" the ECB could use to stimulate the euro
zone economy, which "could have a far bigger impact on the
euro," Reichelt said.
Money markets are pricing in a 72% chance the ECB will cut
rates by 20 basis points on Thursday, lower expectations than
last week. Some analysts suggest the ECB will start buying euro
zone equities, not just government bonds, in a new wave of
quantitative easing.
The euro was neutral against the dollar in early London
trade at $1.1033. It slipped to $1.10155 overnight, its weakest
since Sept. 4. EUR=EBS
Hedge funds have added more short euro positions, taking the
amount of contracts to $6.74 billion in the week to Sept. 3, the
highest in a month, though positions were not as big as in
April. EURNETUSD=
The dollar index, which tracks the U.S. currency against six
other currencies .DXY , was flat at 98.438. The dollar was
confined to a narrow range against the yen as traders weighed
the prospect of U.S. rate cuts against their demand for
safe-haven assets. Dollar/yen was last flat at 106.93 JPY=EBS .
The Federal Reserve will continue to act "as appropriate" to
sustain the U.S. economic expansion, Fed Chair Jerome Powell
said Friday in Zurich, bolstering expectations for a rate cut at
the Fed's meeting on Sept. 18. Elsewhere, the Australian dollar, a proxy for risk, jumped
to a five-week high of 0.68625 against the U.S. dollar AUD=D3
as traders became more optimistic that China would withstand the
impact of trade disputes with the United States, after its
central bank cut its reserve rate ratio.
The New Zealand dollar held onto gains, trading at 0.6419
against the U.S. dollar NZD=D3 , not far from the four-week
high of 0.6444 it reached on Friday.
Sterling was down 0.4% at $1.2235 GBP=D3 as traders waited
to see whether the British parliament would vote to hold an
early general election before the Oct. 31 Brexit deadline. If a
snap election were held and the Conservative Party won, it could
scrap recent legislation to extend Britain's exit from the
European Union for a third time. Against the euro, sterling was
0.5% lower at 90.13 EURGBP=D3 .
Hedge funds' latest net short positions on the euro https://tmsnrt.rs/3181NHI
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