FOREX-Pound at 5-1/2-month low as Johnson leads, Aussie vulnerable

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* Pound under pressure as Johnson fans no-deal Brexitworries

* China-U.S. friction undermines Aussie

* Fed's policy review next key focus

By Hideyuki Sano

TOKYO, June 18 (Reuters) - The British pound on Tuesdaylanguished near this year's low on rising worries Boris Johnson,the front-runner to replace UK Prime Minister Theresa May, couldput Britain on a path towards a dreaded no-deal Brexit.

The Australian dollar is also at its lowest levels since theflash crash of early January, hit by growing expectations ofanother rate cut by the country's central bank and by thespectre of a further slowdown in China - Australia's largestexport market.

The yen and the euro were steadier, with investors holdingout for trading clues from policy-setting meetings by the U.S.Federal Reserve and the Bank of Japan as well as a conferenceorganised by the European Central Bank, all scheduled this week.

"While major currencies were little moved now, when you lookat market moves over the past week or so, many commoditycurrencies and emerging market currencies are weak, reflectingbroad risk-off sentiment," said Masashi Hashimoto, senioranalyst at MUFG Bank.

The U.S-China trade frictions and rising geopoliticaltensions in the Strait of Hormuz after recent attacks on tankersare all undermining risk sentiment, he said.

Worries about Brexit hit the British pound, which tumbled toa 5-1/2-month low of $1.2532 on Monday and last traded at$1.2539 GBP=D4 .

Sterling also fell to its weakest level since January against the euro, which climbed to 89.50 penceEURGBP=D4 ,compared to a two-year low of 84.56 touched just over a monthago.

Former foreign minister Boris Johnson got a boost on Monday in his campaign to succeed May as one of his former rivals andEU supporter Matt Hancock backed him. urn:newsml:reuters.com:*:nL8N23O175

That rattled markets as Johnson, the face of the officialcampaign to leave the European Union in the 2016 referendum, haspromised to lead the United Kingdom out of the EU with orwithout a deal.

The pound could be in for a rough ride in coming days, witha raft of potentially market-moving events ahead, includingconsumer inflation and retail sales data, due on Wednesday andThursday respectively, and the Bank of England's policyannouncement on Thursday.

The risk-sensitive Australian dollar drooped at $0.6855AUD=D4 , just above its 5-1/2-month low of $0.6849 hitovernight, as trade tensions between the United States and Chinahave shown few sign of abating.

Markets are pricing in about 50% chance of another rate cutnext month by the Reserve Bank of Australia, which delivered its first easing in almost three years just two weeks ago. RBAWATCH

The euro hardly budged at $1.1220EUR= while the dollarwas little moved at 108.53 yenJPY= .

The dollar was slightly undermined by the New York Fed'sbusiness index showing a record fall this month to its weakestlevel in more than 2-1/2 years. urn:newsml:reuters.com:*:nL2N23O0AN

The Fed's two-day policy meeting starting later on Tuesdayis the next major focus after markets have priced in more thantwo 25 basis-point rate cuts by year-end.

That marks a sharp contrast to the Fed's official forecastin March, which showed policymakers deemed the next move wouldbe a hike.

"As markets are now pricing in rate cuts in the second halfof this year, the question is how the Fed will respond to suchan outlook," said Shinichiro Kadota, senior strategist atBarclays.

(Editing by Shri Navaratnam) ((hideyuki.sano@thomsonreuters.com; +81 3 6441 1827; ReutersMessaging: hideyuki.sano.thomsonreuters.com@reuters.net))

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

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