FOREX-Dollar dips on increased expectations of a 2019 Fed rate cut

(Recasts; updates prices)
By Kate Duguid
NEW YORK, June 3 (Reuters) - The U.S. dollar fell on Monday
after St. Louis Federal Reserve President James Bullard said an
interest rate cut "may be warranted soon," given the rising
economic risk posed by global trade tensions as well as weak
U.S. inflation.
Bullard said that while the Fed cannot respond to every
change in the rapidly evolving trade feud, recent events like
the unexpected announcement of new tariffs on Mexican imports
have created "an environment of elevated uncertainty... that
could feed back to U.S. macroeconomic performance" as the global
economy slows. Also on Monday, a national survey showed U.S. manufacturing
activity slowed in May to its weakest pace in more than two
years as factory managers raised concerns about a trade war
between the United States and China. The mounting trade tension has prompted investors to move
out of riskier assets like U.S. stocks and into safe-havens like
the yen and franc. Against a basket of six major currencies, the
dollar was 0.63% lower at 97.131 .DXY , though it is still up
about 1% this year.
"Though we think the recent warning shot towards Mexico
could be resolved, the road ahead on the global trade front is
likely to remain challenged until the G20 later this month,"
wrote Mark McCormick, global head of foreign exchange strategy
at TD Securities.
"This backdrop leaves us taking a sell-on-rally posture with
dollar/yen."
The yen JPY= hit its strongest level against the dollar
since Jan. 10, at 107.88, last down about 0.31% from the prior
session close.
The franc CHF= has risen close to levels at which the
Swiss National Bank has traditionally intervened to keep the
currency weak. Against the euro EURCHF= it rallied more than
half a percent to 1.112 francs, its strongest since July 2017,
though it was last weaker at 1.116. Against the dollar it was at
its strongest since March 27, with the dollar 0.99% weaker at
0.991 francs.
"While the Swiss franc has appreciated strongly in recent
weeks, much of that gain is due to the wave of risk aversion
sweeping across markets and we need to see further substantial
gains before the central bank has to step in," said Manuel
Oliveri, a currency strategist at Credit Agricole in London.
The Swiss National Bank, which pursues a monetary policy of
negative interest rates and currency intervention, has
traditionally intervened when the franc has risen to around 1.10
francs per euro, but low inflation and trade tensions suggest
the franc has to gain far more from current levels.