FOREX-Yen trades near three-week low before BOJ, Fed meetings

* Graphic: World FX rates in 2019 http://tmsnrt.rs/2egbfVh
* Yen on back foot ahead of BOJ meeting
* Dollar supported as bets on aggressive Fed rate cuts wane
* Sterling struggles with growing chance of no-deal Brexit

By Stanley White
TOKYO, July 30 (Reuters) - The yen held near a three-week
low on Tuesday as pared expectations for aggressive Federal
Reserve cuts supported the dollar and ahead of a Bank of Japan
meeting, which is seen as a key test for policymakers amid a
global monetary easing cycle.
The BOJ is expected to keep monetary policy on hold at a
meeting ending later on Tuesday, but some investors say there is
a chance Japan's central bank could change its forward guidance
to reassure traders that rates will remain low.
Against a basket of six major currencies, the dollar traded
near a two-month high. The U.S. Fed is expected to cut rates by
25 basis points on Wednesday, but this is more likely to be a
one-off than the first in a series of several rate cuts.
The pound hit a new 28-month low early in Asia trade as
investors grew increasingly nervous about the prospects of a
no-deal Brexit under new British Prime Minister Boris Johnson.
Monetary policy is likely to set the tone for currency
markets in coming months as central banks from Australia, New
Zealand, Europe and possibly Britain are expected to cut rates
due to low inflation and risks to global economic growth.
"The BOJ may not have much influence on the currency market
because of their limited policy options," said Junichi Ishikawa,
senior foreign exchange strategist at IG Securities in Tokyo.
"We need to focus on how the Fed views the U.S. economic
outlook, because Fed Reserver Chairman Jerome Powell is still
optimistic about the economy. This could lead to a bounce in
yields and the dollar."
The yen JPY=EBS was quoted at 108.835 per dollar, close to
a three-week low of 108.900 reached on Monday.
The market consensus is for the BOJ to maintain a pledge to
guide short-term interest rates at -0.1% and the 10-year bond
yield around 0% via aggressive bond purchases. Some investors, however, see a possibility the BOJ may tweak
its forward guidance and commit to keeping rates ultra-low over
a longer-term horizon.
Currently, the BOJ commits to maintaining rates at current
extremely low levels "for an extended period of time, at least
through around spring 2020".
The BOJ's decision is expected 0300-0500 GMT.
The dollar index .DXY was little changed at 98.074, near a
two-month high of 98.165.
The Fed is forecast to cut its target interest rate range on
Wednesday by 25 basis points to 2.00%-2.25%.
Investors previously saw the chance of an even more
aggressive 50-basis point cut, according to interest rate swaps,
but these expectations have dissipated as data has shown the
U.S. economy is not as weak as some feared.
Sterling GBP=D3 briefly slipped to $1.2209, the lowest
since March 2017.
There is a growing risk of a no-deal Brexit where Britain
exits the European Union without a trade deal in place. There is
also a chance that new Prime Minister Johnson will call an early
election.