FOREX-Buoyed dollar sends euro, sterling to 2 1/2-year lows

* Euro plunges to 26-month low vs dollar
* Decline comes after Fed sounds less dovish than expected
* Sterling hits 30-month low vs dollar
* Fed rhetoric, Brexit worries blamed
* Graphic: World FX rates in 2019 http://tmsnrt.rs/2egbfVh

By Olga Cotaga
LONDON, Aug 1 (Reuters) - Gains by the dollar after the
Federal Reserve cut interest rates sent the euro to a 26-month
low against the U.S. currency on Thursday, as investors decided
a lengthy Fed easing cycle was unlikely after the first rate cut
since the financial crisis.
In a widely expected move, the U.S. central bank cut rates
by 25 basis points on Wednesday to shore up the economy. But
that cut and one expected later this year were considered
insurance cuts, meant to prevent the economy from weakening.
"It's not the beginning of a long series of rate cuts," Fed
Chairman Jerome Powell said after the Fed's decision, although
he added, "I didn't say it's just one rate cut."
"The comments by Powell were not particularly dovish, so
this is confirmation that this is a small insurance cut," said
Masafumi Yamamoto, chief currency strategist at Mizuho
Securities in Tokyo.
"This outcome limits the dollar's downside from here. Rate
cuts will be on the small side, but this still strengthens the
case for a prolonged U.S. economic expansion, which is positive
for the dollar long term."
The euro EUR=EBS was last down 0.3% at $1.1040, near the
26-month low of $1.1034 it reached in Asian trading. In the past
three months, the euro had shed 1.3% against the dollar.
The index that tracks the dollar against a basket of six
major currencies .DXY rose as high as 98.93, a 26-month jump.
The Japanese yen fell to a three-month low of 109.32 against
the dollar and was last down 0.4% at 109.16.
Sterling GBP=D3 dropped to a 30-month low of $1.2101
during Asian trading. Fears of a no-deal Brexit continue to
afflict the pound, which was last down 0.3% at $1.2120. It was
higher against the weakening euro at 91.17 pence EURGBP=D3 .
Britain's deputy finance minister, Rishi Sunak, said the UK
wants a Brexit deal, but "we must have the firmness to leave if
necessary without a deal" Investors and analysts expect sterling to decline further as
more headlines emphasize the growing probability Britain will
quit the European Union without trade agreements on Oct. 31.
Sentiment for sterling took a turn for the worse after
Britain's new prime minister, Boris Johnson, packed his cabinet
with Brexit supporters last month.
"Sterling remains vulnerable to a further escalation in
Brexit tensions and we anticipate the market will likely
discount higher risks of a ‘no deal' outcome in the weeks
ahead," said Roger Hallam, currency chief investment officer at
J.P. Morgan Asset Management.
Traders will be watching the Bank of England monetary policy
announcement later on Thursday to see whether it will respond to
the growing probability of a no-deal Brexit. The BoE is widely
expected to keep its benchmark interest rate unchanged at 0.75%.
Elsewhere, the Swiss franc was flat at 1.10 against the euro
and the Australian dollar was unchanged at 0.6849 against the
dollar.