FOREX-Euro falls back from 2-1/2 month highs, yuan nears 2019 low

* Sources say ECB open to rate cuts, euro drops
* U.S.-Mexico migration deal boosts sentiment
* Chinese offshore yuan a whisker from 2019 low
* Graphic: World FX rates in 2019 http://tmsnrt.rs/2egbfVh

(Adds details, analyst quotes)
By Tommy Wilkes
LONDON, June 10 (Reuters) - The euro pulled back from 2-1/2
month highs on Monday as a U.S.-Mexico deal over migration
boosted the dollar and after sources said European Central Bank
policymakers were open to cutting the ECB's policy rate should
economic growth worsen.
The single currency rocketed last week after the ECB did not
- as some had anticipated - hint at interest rate cuts, instead
saying rates would stay "at their present levels" until
mid-2020.
But on Sunday two sources familiar with the ECB's policy
discussions said a cut was firmly in play if the bloc's economy
was to stagnate again after expanding by 0.4% in the first
quarter of the year. "The policymakers are trying to figure out if there is
anything they can do to ease (further) and whether it would
work," said Kit Juckes, an analyst at Societe Generale.
However, Juckes said it was hard to see the euro rallying
significantly from here unless investors slashed their short
positions or European economic fundamentals improved.
The euro fell 0.2% to $1.1306 EUR=EBS after hitting
$1.1348 last week, its highest since March.
The dollar index gained 0.3% to 96.825 .DXY . The greenback
had weakened last week after poor economic data encouraged
investors to scale up their bets that the Federal Reserve would
soon cut interest rates. The Mexican peso surged more than 2% after the United
States and Mexico struck a deal on migration to avert a trade
tariff war, supporting a rebound in investor risk appetite that
also knocked the safe-haven yen lower.
Goldman Sachs analysts noted that trade tensions had
generally pushed the dollar higher this year and last.
"But even if trade disputes worsen from here, we are unsure
that this would imply sustained dollar appreciation. Instead,
the various pillars of dollar support seem to be giving way, and
we now see the greenback on a choppy downward path through
year-end," they said in a note to clients.
The Mexican peso MXN= rose more than 2% to 19.186 pesos
per dollar after trading resumed for the first time following
Friday's migration agreement. U.S. President Donald Trump had threatened to impose 5%
import tariffs on all Mexican goods starting on Monday if Mexico
did not commit to do more to tighten its borders.
The yen shed 0.3% to 108.65 JPY=EBS after earlier hitting
its weakest since late May, though it remains more than 3%
stronger than its levels of April. Investors also sold the Swiss
franc EURCHF=EBS CHF=EBS .
China's yuan CNY=CFXS brushed its lowest since late
November after weak import data reignited worries about slowing
domestic demand. The offshore rate CNH=EBS was slightly lower
at 6.9532 yuan per dollar but held above Friday's 2019 low.
Sterling was caught by the dollar's recovery and a surprise
0.4% contraction in British gross domestic product in April. The
pound fell 0.4% to $1.2689 GBP=D3 . (Editing by John Stonestreet, editing by Ed Osmond)