* Graphic: World FX rates in 2019 http://tmsnrt.rs/2egbfVh
By Saikat Chatterjee
LONDON, July 23 (Reuters) - The dollar firmed to a two-week
high versus its rivals on Tuesday, a day after U.S. President
Donald Trump and congressional leaders agreed a two-year
extension of the debt limit, dousing fears of a government
default later this year.
The greenback rose 0.31% versus a basket of its rivals
.DXY to 97.47, its highest level since July 9. The dollar's strength was also due to a broadening weakness
in the euro EUR=EBS as investors gear up for news of fresh
stimulus from the European Central Bank on Thursday.
Though money markets have trimmed bets on a 10 basis point
deposit rate cut from the ECB to less than 40% from roughly 60%
on Friday, analysts expect dovish forward guidance and possibly
more generous terms for its planned new multi-year
loans. "Historically, the ECB has been more far more effective at
queuing up policy stimulus than delivering it, but there is no
taking away the fact that we are in for some volatility ahead on
the euro," said Neil Mellor, a senior currency strategist at BNY
Mellon in London.
Hopes of policy easing have increased since ECB President
Mario Draghi's June speech in Sintra, with Italian bond yields
falling by more than 100 basis points since then and the euro
weakening by more than 2% over that period.
INTERVENTION TERRITORY
The New Zealand dollar NZD=D3 was the biggest loser among
developed currencies after Bloomberg News reported that the
central bank is refreshing its strategies for unconventional
monetary policy.
The euro EUR=EBS struggled against the dollar but held
firm at a two-year high versus the low-yielding Swiss franc, at
around 1.10 francs per euro, on rising concerns that the Swiss
National Bank may intervene aggressively to weaken the currency.
While a level below 1.10 francs per euro is considered
intervention territory, broadly unchanged sight deposits data
from the SNB, the clearest indicator of the Swiss central bank
purchasing francs, indicate authorities are not unduly worried
about the Swiss currency's strength for now.
The dollar's strength was also bolstered by general firmness
in U.S. debt, with benchmark 10-year yields US10YT-RR hovering
around 2.05%.
Britain's pound was the other notable loser in early London
trading, sliding towards the mid $1.24 region GBP=D3 ahead of
the results of the Conservative Party leadership contest. Boris
Johnson is widely expected to win and replace Theresa May as
prime minister.
Concerns that Britain will crash out of the European Union
without a deal have grown after Johnson said he would pull
Britain out of the European Union on Oct. 31 "do or die".
The pound GBP=D3 traded at $1.2459, within striking
distance of a 27-month low of $1.2382 reached last week.
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