FOREX-Dollar treads water on Fed views, geopolitics

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

By Saikat Chatterjee
LONDON, June 17 (Reuters) - The dollar was little changed on
Wednesday after U.S. retail sales rose more than expected in
May, although caution kept investors from aggressively buying
riskier currencies like the Australian dollar.
U.S. Federal Reserve Chairman Jerome Powell doused some of
the market's optimism on Tuesday with a rather bleak picture of
the U.S. economy, while also reinforcing hopes for continued
policy support. Discouraging news over the past 24 hours -- record-high
coronavirus infections in six U.S. states, clashes between
Indian and Chinese troops in the western Himalayas and new
coronavirus cases in Beijing -- also undermined
sentiment. Against a basket of other currencies =USD , the dollar
edged 0.1% lower to 96.89. The index has bottomed out after
reaching a three-month low last week, but the broad outlook
remains pessimistic.
"Market players are looking to, with caution, how critical
the impact from any second wave of infections on the economy
will be," said Kazushige Kaida, head of FX sales at State
Street. "It's not that markets are pessimistic... But the length
of time people hold their positions is getting shorter."
The Fed's Powell said that a full U.S. economic recovery
will not occur until the American people are sure the novel
coronavirus epidemic has been brought under control.
That remains far from certain, with new coronavirus
infections rising to record highs in six U.S. states, including
populous Texas and Florida, on Tuesday. China also sharply ramped up restrictions on people leaving
Beijing on Tuesday in an effort to stop the worst coronavirus
flare-up since February from spreading. The Fed's cautious message also checked the momentum in the
euro EUR=EBS , which held below a three-month high of $1.1422
reached last week. It was trading at $1.1286 on Wednesday after
rallying nearly 5% since a Franco-German proposal for a recovery
fund in late May.
Brexit developments continued to hobble the British pound
GBP=D3 . Sterling was steady around $1.2576, below a
three-month high above $1.28 hit earlier this month.