FOREX-Dollar gains after Fed pushes back on big rate cut bets

* Graphic: World FX rates in 2019 http://tmsnrt.rs/2egbfVh

By Saikat Chatterjee
LONDON, June 26 (Reuters) - The dollar rose on Wednesday as
expectations dwindled for aggressive cuts in U.S. interest rates
after comments by Federal Reserve officials.
Fed Chairman Jerome Powell stressed the central bank's
independence from U.S. President Donald Trump, who is pushing
for rate cuts. St. Louis Fed President James Bullard, considered
one of the most dovish U.S. central bankers, surprised some
investors by saying a 50-basis-point cut in rates "would be
overdone." The dollar fell last week after policymakers opened the door
to rate cuts in coming months. Some traders thought the Fed
might cut rates by as much as 50 basis points next month.
However, the overnight comments tamped down those
expectations, pulling the dollar up from three-month lows
against a basket of other currencies in the previous session at
95.843 .DXY . It was up 0.1% at 96.273.
Commerzbank strategists said a 50-basis-point cut would
indicate the Fed was in a hurry, increasing the likelihood more
would be coming than the market expected. Money markets are
currently pricing in up to three rate cuts this year.
But the bounce is likely to be short-lived. Derivative
markets suggest markets are ready for a weaker dollar.
Against the Japanese yen JPY=EBS , for example, traders
have built up large option bets between 107.50 to 107 yen. In
the cash market, the yen was trading at 107.45 yen.
The New Zealand dollar NZD=D3 was the big gainer early in
London against the U.S. dollar. The kiwi NZD=D3 gained 0.4% to
$0.6661 from $0.6536 after the Reserve Bank of New Zealand left
rates unchanged at 1.5% at its policy meeting, though it
signalled another cut was likely. AUD/
Elsewhere, the pound remained near five-month lows at
$1.2669 after Boris Johnson, the leader in a contest to replace
Prime Minister Theresa May, reiterated his commitment to leave
the European Union with or without an agreement by Oct. 31.