* Graphic: World FX rates in 2019 http://tmsnrt.rs/2egbfVh
* Fed opens door to rate cut as early as July
* Focus shifts to by how much the Fed could opt to cut in
July
* BOJ keeps policy on hold
* BOE policy decisions awaited
(Adds analyst's quote)
By Shinichi Saoshiro
TOKYO, June 20 (Reuters) - The dollar fell on Thursday,
skidding to a six-month low versus the yen, after the U.S.
Federal Reserve signalled it was ready to lower interest rates
to combat growing domestic and global risks.
The Fed left interest rates unchanged on Wednesday as widely
expected but said the case for lower rates was building,
suggesting it could ease monetary policy as early as next month
as it took stock of rising trade tensions and growing concerns
about weak inflation. Sterling held on to gains against the dollar ahead of a Bank
of England meeting where policymakers are expected to hint at
more interest rate hikes.
However, the BOE could be an outlier as other central banks
turn dovish and enter a rate cutting cycle, which increases the
chance of further declines in bond yields on a global scale.
"Sentiment for the dollar is weak," said Kiyoshi Ishigane,
chief fund manager at Mitsubishi UFJ Kokusai Asset Management
Co. "Against the yen, further downside may be limited for now,
but there is room for more dollar selling elsewhere."
The dollar fell to 107.54 yen JPY= , the lowest since
January, and then pared some of its loses to trade at 107.63
yen, down 0.4% on the day.
The greenback came under additional pressure after benchmark
10-year Treasury yields fell to the lowest in more than two
years.
The dollar also took a knock after Bloomberg reported that
U.S. President Donald Trump believes he has the authority to
replace Fed Chair Jerome Powell and demote him to be a board
governor. The dollar index .DXY against a basket of six major
currencies fell 0.2% to 97.572.
The yen held onto its gains versus the dollar after the Bank
of Japan kept its ultra-loose monetary policy unchanged.
"Even though the market had anticipated much of what the Fed
said, the dollar's fall was still a relatively large one," said
Daisuke Karakama, chief market economist at Mizuho Bank.
"The main question is no longer if the Fed will cut rates in
July, but whether the easing will be by 25 or 50 basis points."
The pound GBP=D4 also rose 0.3 to $1.2678. Sterling was
buoyant ahead of the BOE's policy meeting later on Thursday,
where the central bank may strike a relatively more confident
tone than its peers. GBP/
In contrast with the general caution displayed by other
major global central banks, the BoE is expected to repeat its
intention of raising borrowing costs - Brexit permitting.
The euro EUR= extended its gains, rising 0.3% to $1.1266.
The common currency has managed to bounce off a two-week low
of $1.1181 set earlier in the week after European Central Bank
President Mario Draghi's dovish comments sent German bund yields
to record lows.
The New Zealand dollar NZD=D4 jumped by more than 0.5% to
$0.6575 after data showed the New Zealand economy expanded at a
steady pace in the first quarter, supporting the case for the
central bank to keep interest rates unchanged at a meeting next
week. China's yuan CNY=CFXS rallied to its strongest level in
five weeks amid broad dollar weakness and signs that China and
the United States are returning to the negotiating table in
their trade dispute.
(Editing by Shri Navaratnam; Editing by Kim Coghill)