* Dollar off 6-1/2-month lows
* Sterling recovers after dip on Manchester attack
* Graphic: World FX rates in 2017 tmsnrt.rs/2egbfVh
(Updates with afternoon U.S. trading, adds new comments)
By Saqib Iqbal Ahmed
NEW YORK, May 23 The dollar rose against a
basket of major currencies on Tuesday as its worst week of
losses in a year drove some profit taking and investors turned
their attention to Wednesday's release of the minutes of the
U.S. Federal Reserve's meeting early this month.
The dollar index, which tracks the greenback against
a basket of six major rivals, was up 0.2 percent to 97.178. The
index fell to a more than six month low on Monday.
"It's a little bit of profit taking on some of the currency
pairs," said Alfonso Esparza, senior currency analyst at OANDA
Worries over U.S. President Donald Trump's recent firing of
FBI Director James Comey, who was overseeing a probe into
possible links between the president's team and Russia, and
concerns about possible delays in Trump's efforts to implement
his economic stimulus plans have recently pressured the dollar.
On Tuesday, U.S. Treasury Secretary Steven Mnuchin said
while he hopes to get tax reform done this year, it will not
happen by August.
Traders were also looking to the Fed meeting minutes set to
be released at 2 p.m. E.T. (1800 GMT) on Wednesday to get clues
to whether the Fed will raise rates at its June meeting, Esparza
Interest rate futures implied traders saw about a 83 percent
chance of a rate increase at the Fed's June meeting.
"We haven't heard from any Fed members clarifying or warning
the market that they are on the wrong side. That's a positive
sign that June is still a go and the Fed is likely to hike,"
Despite another strong batch of numbers from flash European
purchasing manager surveys and a rise in German
business morale to an all-time high, the euro was
The euro was down 0.29 percent against the dollar at
$1.1203. The common currency rose as high as $1.1267, its
highest since Nov. 9, earlier in the session.
"There are still huge question marks about British elections
and Brexit that will always keep a cap on how much the euro can
really rise," Esparza said.
Meanwhile, sterling was subdued against the dollar as
investors awaited further developments in Britain's suspended
election campaign after a suicide bombing rocked the English
city of Manchester. The pound was down 0.09 percent against the
greenback at $1.2986.
(Reporting by Saqib Iqbal Ahmed; Editing by Chris Reese and