FOREX-Dollar steady after Powell opens door to U.S. rate cut

(Recasts; adds analyst quote; updates prices; adds Fed news;
changes dateline; previous LONDON)
By Kate Duguid
NEW YORK, June 4 (Reuters) - The U.S. dollar was steady on
Tuesday after Federal Reserve Chair Jerome Powell alluded to the
possibility of an interest rate cut in the face of economic
risks, including the global trade war.
The U.S. central bank will respond "as appropriate" to trade
- and other - headwinds, Powell said in a brief statement
included as part of a speech on broader monetary policy issues.
Powell said the Fed was "closely monitoring the implications" of
the trade dispute that has, since the Fed's last meeting,
disrupted global bond and equity markets and posed risks to U.S.
and world economic growth. The dollar index .DXY , which measures the greenback
against a basket of six rival currencies, fell briefly on the
news before recouping those losses and was last 0.06% higher on
the day at 97.204.
"Powell's comments will be seen as slightly dollar negative
but we might not see much of a move today because the greenback
already fell yesterday after (St. Louis Federal Reserve
President James) Bullard. His comments are not as aggressively
dovish as Bullard's yesterday but he does reiterate the same
concerns: trade tensions and low inflation," said John Doyle,
vice president of dealing and trading at Tempus, Inc.
The dollar fell on Monday to a five-month low against the
Japanese yen JPY= after Bullard said an interest rate cut "may
be warranted soon," given the rising economic risk posed by
global trade tensions, as well as tame U.S. inflation. The yen
was last at 108.26, 0.2% weaker on the day. "We are likely seeing the beginning of coordinated Fed-speak
to prep market participants for at least one rate cut this
year," said Doyle.
The economic consequences of the trade war were seen in a
survey on Monday that showed a measure of national factory
activity dropped to a 31-month low in May. On Tuesday, the
Commerce Department reported that new orders for U.S.-made goods
fell in April and shipments dropped by the most in two years,
indicating continued weakness in manufacturing that could
undercut the broader economy. The pound GBP= climbed from a five-month low on Tuesday
but concerns about a disorderly departure from the EU meant
gains were minimal, amid promises from U.S. President Donald
Trump of a "phenomenal" post-Brexit trade deal. It was last
trading up 0.19% at $1.269. The euro pulled back from six-week highs after
lower-than-expected euro zone inflation in May brought the
single currency's rally to a halt. It was 0.02% firmer at $1.124
EUR= .