FOREX-Dollar stalled amid Fed meeting; dovish Draghi depresses euro

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(Recasts; adds analyst quote; updates prices)

By Kate Duguid

NEW YORK, June 18 (Reuters) - The U.S. dollar was littlemoved on Tuesday as traders held off making large bets beforethe Federal Reserve's policy announcement on Wednesday.

The dollar index .DXY was last up 0.08% at 97.640, itshighest since June 3.

"Markets are largely keeping the powder dry ahead oftomorrow's Fed announcement," said Karl Schamotta, chief marketstrategist at Cambridge Global Payments.

"We're thinking that we are going to see a relatively dovishannouncement, certainly acknowledging that risks have grownsince the April meeting," he said, citing the expectation inApril that a U.S.-China trade deal was near.

"A recognition of that worsening environment is very likely,but a rate cut at this point, I don't think is on the table."

On Tuesday, China and the United States rekindled tradetalks ahead of a meeting next week between Presidents DonaldTrump and Xi Jinping, which cheered financial markets but didlittle to move rate cut expectations. urn:newsml:reuters.com:*:nL2N23P0VY

CME Group's FedWatch tool puts the probability of aquarter-point interest rate cut on Wednesday at 24.2%, with a64.7% probability of a cut at its next meeting in July.

The dollar's rise was in part spurred by a weaker euro EUR= , which fell after European Central Bank chief MarioDraghi said policymakers will provide more stimulus if inflationdoes not pick up. It was last down 0.21% at $1.119, a two-weeklow.

At a speech in Sintra, Portugal, Draghi said the ECB couldstill cut rates, adjust its guidance, offer mitigating measuresto counter the unwanted side effects of negative rates, and alsohad "considerable headroom" for more asset purchases. urn:newsml:reuters.com:*:nL8N23P1Q4

"Draghi gave his clearest indication yet that we are lookingat stimulus coming down the pipe and additional monetarydilution. And that is weighing on the euro's value relative tothe dollar and other global currencies," said Schamotta.

With benchmark euro zone interest rates already in negativeterritory and inflation expectations well below central bankforecasts, markets perceived Draghi's comments as dovish. (Reporting by Kate Duguid and Saikat Chatterjee; Editing byCynthia Osterman) ((mailto:kate.duguid@thomsonreuters.com; +1-646-223-6118;Reuters Messaging:kate.duguid@thomsonreuters.com@thomsonreuters.net))

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

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