FOREX-"Perfect storm" for dollar as bets on U.S. rate cuts grow


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    * Graphic: World FX rates in 2019

    By Saikat Chatterjee
    LONDON, June 12 (Reuters) - The dollar fell on Wednesday as
rising trade tensions between Washington and Beijing and growing
bets on a U.S. interest rate cut sapped investor demand for the
    Against a basket of other currencies  .DXY , the dollar
edged 0.1 percent lower to 96.64 and just above a
two-and-a-half-month low of 96.46 reached last week.
    The dollar has suffered a setback after the latest
escalation of the U.S.-China trade, which analysts fear could
tip the global economy into recession.
    Those fears have grown as recent data have pointed to a
global economic slowdown. Chinese factory inflation slowed in
May*:nL4N23H1U6 and Fed officials have become increasingly
cautious. That has fuelled expectations of U.S. rate cuts, a
shift from a few months.
    A Fed watch tool by CME assigns a 18% probability of a U.S.
rate cut next week and a 68% probability of a cut in July.
    "This is a perfect storm for the dollar, and that is also
undermining risk appetite broadly in the market," said Ricardo
Evangelista, a senior analyst at ActivTrades in London.
    The dollar slipped as much as 0.2% against the pound
 GBP=D3 , taking its losses to nearly 1% so far this month.
    It also weakened against the Hong Kong dollar  HKD=D3 ,
which rose towards the midpoint of a daily trading range as bond
auctions and large listings in the local stock market sucked
cash from the local market.*:nZZN2NLP00
    The local dollar also strengthened as the city was roiled by
violent protests against an extradition bill that would allow
people to be sent to mainland China.*:nL4N23J1XC           
    The dollar's latest drop comes as U.S. President Donald
Trump accused the European Union of devaluing the euro zone's
single currency. He also renewed his attacks on the Fed and its
monetary policy*:nL2N23I0D0
    That has raised concerns that the trade tensions between the
United States and the rest of the world will only intensify.
    "The comments about the euro support our view that it’s not
just about China," Brown Brothers Harriman strategists said.
"Come November, auto tariffs will come back into focus with the
EU and Japan on the front lines."  

Hong Kong interbank rates shoot higher
USD valuations
 (Reporting by Saikat Chatterjee; editing by Larry King)
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