FOREX-Fed rate cut bets weaken dollar as focus turns to ECB

* Dollar on the back foot; yen buoyed by global growth fears
* Stronger euro in focus ahead of ECB meeting
* Aussie little moved after RBA cuts rates as expected
* Graphic: World FX rates in 2019 http://tmsnrt.rs/2egbfVh

By Tom Finn
LONDON, June 5 (Reuters) - The dollar struggled near a
seven-week low on Wednesday on rising expectations of a U.S.
central bank interest rate cut in response to trade
conflict-related risks.
Federal Reserve Chairman Jerome Powell dropped his standard
reference to the Fed being "patient" in approaching a rate
decision on Tuesday, saying instead it would respond as "as
appropriate" to trade pressure.
The Fed rethink weakened the dollar for a fifth consecutive
day, lifting the euro and pushing investors into safe-haven
assets including the Japanese yen.
But Wednesday's small moves in the dollar index, which
measures it against a basket of currencies, suggested markets
had already priced in Fed rate cuts.
"Given the extent of the dovish re-pricing of the Fed
outlook and the collapse in U.S. treasury yields in recent
weeks, the dollar losses appear fairly muted in this context,"
said Chris Turner, head of FX strategy at ING in London.
If global growth worsened, the dollar should benefit from
its safe-haven credentials, he added.
The dollar index was flat at 97.059 .DXY . It has fallen
1.3% from a more than two-year high of 98.371 touched on May 23.
The European Central Bank meets on Thursday, with investors
looking to see how concerned policymakers are about signs of a
downturn in growth.
Speculation that the ECB will match Fed dovishness and
possibly even announce looser terms for a new cheap lending
scheme sent German 10-year government bond yields to a record
low of minus 0.2250%.
The euro EUR= was up 0.1% at $1.1260, extending gains to a
fourth session.
Recession fears are sweeping across the world and central
banks have in recent weeks cut rates in what could signal the
start of a global monetary easing cycle.
Australia's central bank on Tuesday slashed benchmark cash
rates to a record low of 1.25% and signalled willingness to go
further if the worsening outlook persists. On Wednesday, the Australian dollar AUD=D4 rose 0.15% to
$0.7000 as data showed growth in the Australian economy picked
up only modestly in the first quarter.
Last month, New Zealand's central bank cut its benchmark
interest rate for the first time in two-and-a-half years as it
moved to support a cooling economy and counter global
uncertainties. Against the yen JPY= , the dollar edged down 0.02% to
108.125 yen per dollar, within striking distance of a five-month
high of 107.845 hit during the previous session.

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