FOREX-Dollar near 2-week high vs yen, euro steady as traders trim rate cut views

* Graphic: World FX rates in 2019 http://tmsnrt.rs/2egbfVh
* Bets on aggressive rate cuts may be excessive
* Draghi's comments on economy support the euro
* Focus turns to U.S. data, Fed meeting

(Adds details on ECB, Australian dollar)
By Stanley White
TOKYO, July 26 (Reuters) - The dollar stayed near a two-week
high versus the yen on Friday as investors pared expectations
for aggressive Federal Reserve interest rate cuts ahead of key
U.S. economic data later in the day.
The euro held gains after the European Central Bank (ECB)
kept policy unchanged, disappointing some market participants
who had bet on an easing, but sources told Reuters a rate cut at
the ECB's next meeting appeared certain. In addition, a bounce in Treasury yields and data on
Thursday showing a surge in U.S. capital goods orders provided
more reasons for traders to reconsider expectations for global
monetary easing.
With no major events scheduled in Asia on Friday, investors
are likely to look to U.S. economic data later in the day. The
focus then shifts to Bank of Japan (BOJ) and Federal Reserve
meetings next week.
The Fed is widely expected to cut rates, but there are
growing views such a move may be a one-off event, not the start
of a major easing cycle. The BOJ is also divided over whether to
ease policy, but expectations for a move are low.
"The market had gotten ahead of itself with expectations for
rate cuts, and now we are starting to correct this," said Takuya
Kanda, general manager of research at Gaitame.Com Research
Institute in Tokyo.
"This is supportive of the dollar. This also means it is
difficult to test the euro's downside at these levels."
The dollar traded at 108.620 yen JPY=EBS , near a two-week
high of 108.755 yen. The greenback was on course for a weekly
gain against the Japanese currency of 0.8%, which would be its
biggest since the week ending April 5.
Against a basket of six major currencies, the dollar index
.DXY was at 97.768 after reaching a two-month high of 98.173.
The dollar index was up 0.7% on the week.
Data due later on Friday is expected to show U.S. economic
growth slowed to 1.8% in the second quarter from 3.1% in the
previous quarter, but investors will focus on consumer spending
to gauge underlying strength of the economy.
The Fed is widely expected to lower its target range of
2.25%-2.50% by 25 basis points at a meeting ending July 31, but
expectations for a 50-basis point have waned due to positive
economic data.
Before the Fed meeting ends, the BOJ announces its policy
decision on July 30. Central bank officials are divided on
whether to ease policy, but some argue there is no immediate
need for action as domestic demand offsets weak exports.

The euro EUR=EBS traded at $1.1151, a mild recovery from a
two-month low of $1.1102. However, the euro was down 0.6% this
week.
After the ECB meeting, President Mario Draghi indicated the
bank was prepared to cut rates at its next one in September and
consider other options for easing. Government bond purchases and
a revamped policy message are also likely at the ECB's next
meeting, four sources close to the discussion told Reuters.
Sterling GBP=D3 edged down to $1.2449, and was on course
for a 0.5% weekly loss. Cable has stabilised since Boris Johnson
became Britain's new prime minister, but there is still
uncertainty about Britain's negotiations to leave the European
Union.
The Australian dollar AUD=D3 slipped to $0.6945, and
looked set for a 1.4% loss for the week.
Reserve Bank of Australia (RBA) Governor Philip Lowe on
Thursday underlined the bank's easing bias by saying rates would
stay low for longer given the board was "strongly committed" to
getting inflation back into the 2-3% target range.
Analysts suspected this would be a lengthy process, given
core inflation has been stuck below 2% for the past three years.
"Aussie should be able to find some near term support,
because we expect the RBA to be on hold for at least a quarter,"
said Mayank Mishra, a macro strategist at Standard Chartered
Bank in Singapore.
"There is still a rather sanguine view of the labour market.
That view needs to be changing for the RBA to commit to further
easing."
The New Zealand dollar NZD=D3 traded at $0.6657, down 1.5%
for the week.
The Reserve Bank of New Zealand is also expected to cut
rates to 1.25% in August, and to 1% by February next year.
RBNZWATCH