FOREX-Dollar recovers after walk-back of dovish Fed comments

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* Graphic: World FX rates in 2019 http://tmsnrt.rs/2egbfVh (Recasts, new throughout; adds analyst quotes; changesdateline, previous LONDON)

By Kate Duguid

NEW YORK, July 19 (Reuters) - The U.S. dollar rose in earlytrading on Friday, swinging back into positive territory afterthe New York Federal Reserve walked back dovish comments fromits president the prior day, which had bolstered expectations ofan aggressive interest rate cut this month.

The dollar dropped before rebounding after a New York Fedrepresentative subsequently said Williams' comments were notabout immediate policy direction.

Williams has "reassured markets that his comments wereacademic and not about immediate policy changes and the dollarhas modestly recovered as a result," said Joshua Tadbir,corporate hedging manager at Western Union Business Solutions.

Investors are now pricing in a 43.1% chance of a 50-basispoint cut in U.S. rates later this month, according to CMEGroup's FedWatch tool, easing off the 60.2% probability hit onThursday. The dollar has held up reasonably well as investorsbet other central banks also will ease policy.

The dollar remains sensitive to any Fed news "as traders arepositioned for at least three rate cuts by year-end includingthe 25-basis point cut that is fully priced into the market thismonth. Should these probabilities change, as a result of the Fedpotentially indicating a one-and-done attitude this month, thenthe dollar could rapidly appreciate as the futures marketre-positions," said Tadbir.

The dollar index .DXY , which hit a two-week low of 96.648on Thursday, was 0.26% higher at 97.042.

The euro fell against the rebounding U.S. dollar on Fridayand hit a 2-year low versus the Swiss franc, as investors rampedup bets for a European Central Bank interest rate cut as earlyas next week.

Money markets are now pricing in a roughly 60% chance of a10-basis point rate cut next week, versus a 40% chance earlierin the week. urn:newsml:reuters.com:*:nL8N24K28E

The euro was 0.39% lower at $1.123EUR= .

Against the Swiss franc it touched a two-year low of 1.103francs per euro EURCHF= , down 0.41% on the day. The franc,viewed as a safe haven, has benefited as investors grow nervousabout the euro zone economic outlook.

The Japanese yen, also a safe haven, dropped against thedollar, falling 0.35% to 107.64 JPY= . (Reporting by Kate Duguid and Tommy Wilkes; Editing by DanGrebler) ((kate.duguid@thomsonreuters.com; +646-223-6118; ReutersMessaging: kate.duguid@thomsonreuters.com@thomsonreuters.net))

This article appears in: Politics , Stocks , World Markets
Referenced Symbols: EFX ,

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