* Graphic: World FX rates in 2019 http://tmsnrt.rs/2egbfVh
By Saikat Chatterjee
LONDON, June 24 (Reuters) - The dollar fell against its
rivals on Monday after sustaining its biggest weekly drop in
four months last week as the U.S. central bank opened the doors
for a likely rate cut as early as next month.
The greenback has been on the receiving end of a broad
market selloff in major currencies as global central banks led
by the U.S. Federal Reserve signalled a dovish outlook on
monetary policy due to growing signs of a weak global economy.
On Monday, the dollar slipped 0.2% against a basket of its
rivals .DXY at 96.028. It fell 1.4% against other currencies
last week .DXY , its biggest weekly drop since mid-February.
"If the Fed embarks on a rate-cutting cycle, the dollar will
weaken more because of the cushion room that the United States
has relative to other economies where central banks are a bit
more constrained to ease policy," said Constantin Bolz of wealth
manager Portfolio Concepts.
Bond markets expect the Fed to cut interest rates by 75
basis points through the end of the year, which would compress
the gap between yields of ten-year U.S. bonds and comparable
German government debt, currently at 234 basis points.
Investors also focused their attention on whether Washington
and Beijing could resolve their trade war at a summit in Japan
later this week.
Markets believe that if the United States and China fail to
call a truce, then the Fed will be forced to cut interest rates
to prevent a wider economic slowdown resulting from higher U.S.
tariffs on imports.
Latest weekly positioning data confirmed that view.
While hedge funds have turned mildly bearish on the outlook
for the dollar in the latest weekly positioning data, they have
ramped up bearish bets against currencies such as the Australian
dollar on fears of rising challenges for the global economy.
Both China and the United States should make compromises in
trade talks, Chinese Vice Commerce Minister Wang Shouwen said on
Monday. Elsewhere, the euro stretched its rally last week, when it
added 1.4%, rising about 0.15% to $1.1386 EUR= , its highest
since March 22. It last traded at $1.1381.
The pound was broadly steady as the leadership contest for
the ruling conservative Party entered its final stretch with
Jeremy Hunt facing rival Boris Johnson to replace outgoing Prime
Minister Theresa May. Against the dollar GBP=D3 , the pound was broadly steady at
$1.2751 while it was a shade weaker against the euro EURGBP=D3
at 89.31 pence.
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FX market positions https://tmsnrt.rs/2ZOx6GB
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