FOREX-Dollar crumbles to new lows vs euro, yen on rate cut bets

* Euro hovers around $1.14, hits new 3-month high
* Yen rises above 107 vs dollar, highest since January
* Analysts divided on whether dollar weakness will last
* Graphic: World FX rates in 2019 http://tmsnrt.rs/2egbfVh

By Tommy Wilkes
LONDON, June 25 (Reuters) - The U.S. dollar fell to a
three-month low against the euro and dropped to its weakest
against the Japanese yen since early January as the prospect of
monetary easing by the Federal Reserve knocked demand for the
U.S. currency.
The euro hit a three-month high of $1.1412 EUR=EBS , having
gained 2.0% from a two-week low of $1.1181 touched a week ago as
the dollar has lost steam. It last stood at $1.1396.
The dollar was last down 0.3% at 106.97 JPY=EBS , having
only fallen below 107 yen per dollar in the January flash crash
and then last back in April 2018.
The yen has benefited from investor nerves over tensions
between the United States and Iran. Tehran said on Tuesday that
U.S. sanctions permanently closed the path to diplomacy between
the two countries. Selling in the dollar has accelerated after the U.S. Federal
Reserve last week signalled it would cut interest rates before
year-end on mounting worries about an economic slowdown and the
fallout from tariff wars between U.S. President Donald Trump
and China.
U.S. 10-year Treasury yields US10YT=RR again fell below 2%
in earlier trading, reducing the interest rate advantage the
dollar has enjoyed over rivals in recent years.
"We expect the Fed's pre-emptive cuts to temporarily weigh
on the USD, especially vs. G10 currencies, as the US rates
advantage compresses amid an environment of slowing global
growth," said Marvin Barth, foreign exchange strategist at
Barclays.
"However, the Fed's ability to support an extended US
expansion stands in contrast to clear sustained slowing – and
rising risks – in China and Europe, implying a USD rebound in
2020."
The dollar index .DXY against a basket of six major rivals
fell to its lowest level in three months to 95.843, having lost
1.7% during the latest five sessions, and was last down 0.1% at
95.909.
Fed Chairman Jerome Powell and a few other of its
policymakers are due to speak later on Tuesday.
Investors are waiting to see whether Trump and Chinese
President Xi Jinping would at least call a truce in their trade
war when they meet at the G20 summit in Osaka late this week.
Trump considers his meeting with Xi an opportunity to
"maintain his engagement" and see where China is on their trade
dispute, a senior U.S. official said on Monday. Kazushige Kaida, head of forex at State Street Global
Markets in Tokyo, said he believes the current market consensus
is that the two leaders are "unlikely to agree on a deal".
Elsewhere, sterling benefited from the broad dollar
weakness, rising to $1.2765 GBP=D3 , up 0.2% on the day.
The pound, however, is likely to remain under pressure
because of Brexit concerns, with eurosceptic Boris Johnson the
frontrunner to become the next leader and prime
minister. The euro was slightly firmer against the Swiss franc, at
1.1089 francs EURCHF=EBS .

(Editing by Angus MacSwan)