FOREX-Dollar drops as rate cut bets mount, weak inflation halts euro's rally

* Dollar on the back foot; yen buoyed by global growth fears
* Weaker inflation knocks the euro from recent highs
* Aussie little moved after RBA cuts rates as expected
* Graphic: World FX rates in 2019 http://tmsnrt.rs/2egbfVh

(Adds quotes, details, latest prices)
By Tommy Wilkes
LONDON, June 4 (Reuters) - The U.S. dollar weakened to its
lowest since mid-April on Tuesday as investors bet the Federal
Reserve could soon cut interest rates, while concerns about
global growth encouraged investors to buy the safe-haven yen.
The euro rose on the back of dollar weakness but
lower-than-expected euro zone inflation in May brought the
single currency's rally to a halt.
The benchmark 10-year U.S. Treasury yield US10YT=RR fell
to its lowest since September 2017 overnight after St. Louis
Federal Reserve President James Bullard said a rate cut "may be
warranted soon" given weak U.S. inflation and the threat global
trade tensions pose to economic growth. The Japanese yen has been the main beneficiary from a shift
towards assets investors deem safer. It rose as much as 0.2% to
107.84 JPY=EBS yen per dollar, its strongest since Jan. 10.
The dollar index, which measures the greenback against a
basket of currencies, slipped to 96.995 .DXY , its weakest
since April 18, before recovering as the euro reversed its
gains.
"As long as it (the dollar) is at the centre of the trade
conflict, U.S. yields fall due to concerns about real economic
effects and the market is literally calling out for rate cuts,
there are no positive arguments supporting the dollar,"
Commerzbank analyst Antje Praefcke said.
Other strategists are less bearish on the dollar, arguing
that rate cuts have already been priced in and noting that if
global growth does worsen, the dollar should benefit from its
safe-haven credentials.
The euro pulled back from six-week highs after weaker than
expected flash consumer price inflation for the month of May but
was still 0.1% firmer at $1.1247 EUR=EBS by 1030 GMT.
The European Central Bank meets on Thursday, where investors
will look to see how concerned policymakers are about signs of a
downturn in growth.
Some analysts remain cautious on the euro, seeing its
fortunes largely tied to the outlook for rate cuts by the Fed,
which has more space for monetary easing than the ECB does.
"We still see the policy background in the euro zone leaving
the euro as the anti-dollar," said Adam Cole, currency
strategist at RBC Capital Markets, predicting euro/dollar could
fall to $1.10 before finishing the year at $1.14 - still firmly
within its current trading range.
The Australian dollar was little changed, at $0.6977
AUD=D3 , after the Reserve Bank of Australia cut interest rates
to a record low of 1.25%, as expected. The pound GBP=D3 rose 0.1% to $1.2673, up from a
five-month low of $1.2560 set on Friday. However, it slid to a
20-week low against the euro EURGBP=D3 . Sterling has fallen on the prospect of a eurosceptic prime
minister replacing Theresa May who could push for a more
decisive break from the European Union, Britain's largest
trading partner.

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(Editing by Larry King and Ed Osmond)