FOREX-Euro off two-year highs before Fed meeting

* Dollar rises against most currencies, especially Kiwi
dollar
* Turkish lira close to record lows after mini-flash crash
* Graphic: World FX rates in 2020 https://tmsnrt.rs/2RBWI5E

By Olga Cotaga
London, July 28 - The euro retreated from its two-year high
on Tuesday as dollar sales declined before a two-day Federal
Reserve meeting, during which investors expect its outlook will
be reaffirmed.
No monetary policy changes are likely, but traders are
speculating about a change in emphasis in the Fed's forward
guidance at the meeting, which starts on Tuesday. Some dollar weakness came amid political wrangling over the
next U.S. fiscal rescue package. The Republican leadership of
the U.S. Senate introducing a proposal for the next coronavirus
relief package, a $1 trillion plan called the Heals Act, but
concerns were still evident over the details. "The notable highlight, which will reinforce concerns over
the outlook for the U.S. economy, was the plan to cut the
unemployment claim support from $600 to $200 per week, a larger
cut than originally reported," said Derek Halpenny, head of
research at MUFG.
"Delay in getting a deal agreed will cause unavoidable
damage to the real economy, given the high level of uncertainty
it is now creating," Halpenny said.
The euro was last trading down 0.3% at $1.1715 EUR=EBS ,
off the $1.1781 two-year high reached the day before. The dollar
rose the same amount versus the pound and the Japanese yen.
The New Zealand dollar fell the most against the greenback,
sliding 0.6% to 0.6644 NZD=D3 .
"Yesterday's moves were pretty violent, and followed moves
of a similar magnitude last week," said Stephen Gallo, currency
analyst at BMO Capital Markets, adding that there has been "some
of the final pre-Fed positions adjusted into the early part of
the Asian session today."
The dollar had been tumbling since May and was dumped in
recent days as flaws in the U.S. coronavirus recovery and
crumbling yields sent investors elsewhere.
Most analysts say the reasons for the dollar's decline,
especially falling real yields, remain intact, but the pace of
the drop probably warranted a pause - particularly with a Fed
meeting and a U.S. spending package in the offing.
U.S consumer confidence and manufacturing data due at 1400
GMT will also provide evidence on the U.S. economic recovery.
Traders pushed the cost of one-month euro/dollar options to
a four-month high on Tuesday, suggesting money managers were
preparing for unexpected moves in the pair in coming weeks.
EUR1MO=FN
Elsewhere, the Turkish lira was close to record lows after
it plunged 2% in minutes on Monday before reversing most of that
fall. EURTRYD3=R The lira has fallen about 7% against the euro
in two months. It was virtually flat against the dollar
TRYTOM=D3 .