August 23, 2019 / 3:04 PM / a month ago

FOREX-Dollar falls as Fed's Powell leans dovish

    * Fed's Powell says Fed to act as appropriate
    * Fed's Mester, Kaplan comment on easing cycle
    * September rate cut fully priced in
    * Graphic: World FX rates in 2019 tmsnrt.rs/2egbfVh

 (Recasts, adds analyst comment, Fed's Powell's remarks, updates prices)
    By Gertrude Chavez-Dreyfuss
    NEW YORK, Aug 23 (Reuters) - The dollar slipped from three-week highs against the euro and one-week
peaks versus the yen on Friday after Federal Reserve Chair Jerome Powell set the stage for further
interest rate cuts, leaning away from earlier comments by other Fed officials who said further easing was
not necessary for now.
    Markets were divided on what they thought Powell would say at the Jackson Hole, Wyoming, symposium.
Some expected he would announce a major stimulus measure to ease a deteriorating global economic outlook,
while others believed he would downplay the chances of a September rate cut even though that has been
fully priced in by investors.
    In his speech on Friday, Powell straddled the middle of both views, giving few clues as to what is to
happen next at the September policy meeting.
    Powell said the U.S. economy is in a "favorable place" and the Fed will "act as appropriate" to keep
the current economic expansion on track.
    "I don't really know what the market was thinking would be delivered, but if you're betting on another
two or three cuts, you wouldn't be dissuaded by this speech based on the headlines," said Richard
Franulovich, head of FX strategy at Westpac in New York.
    "It doesn't look like he has leapfrogged expectations. I guess he's cementing an easing bias, and he's
prepared to do more as needed," Franulovich added.
    In late morning trading, the euro edged higher to $1.1086, after earlier touching a three-week
low of $1.1052. An index that tracks the dollar against six major currencies was little changed at
98.206.
    The dollar turned lower against the yen, trading down 0.2% at 106.23 yen, after hitting a
one-week high of 106.73 earlier in the session.
    Before Powell's speech, a chorus of Fed officials preached patience on Thursday and Friday.
    Cleveland Federal Reserve President Loretta Mester, who did not support last month's rate cut, told
CNBC that if the economy continues to perform the way it has, the U.S. central bank "should keep things
the way they are."
    Dallas Fed President Robert Kaplan, for his part, said he does not see July's easing as part of a
rate-cutting cycle.
    On Thursday, Kansas City Fed President Esther George and Philadelphia Fed President Patrick Harker
said the Fed currently does not need to further stimulate the economy.
    Those comments led some market participants to expect a less dovish tilt from Powell on Friday.
    Currency markets have in recent months been driven by a shift at global central banks to looser
monetary policy as economic demand slows and trade disputes intensify.
    Money markets price in at least two U.S. rate cuts of 25 basis points this year. 
    
    ========================================================
    Currency bid prices at 10:52 AM (1452 GMT)
 Description      RIC         Last           U.S. Close  Pct Change     YTD Pct     High Bid    Low Bid
                                              Previous                   Change                 
                                              Session                                           
 Euro/Dollar      EUR=        $1.1110        $1.1078     +0.29%         -3.13%      +1.1114     +1.1052
 Dollar/Yen       JPY=        106.1100       106.4200    -0.29%         -3.76%      +106.7300   +106.1100
 Euro/Yen         EURJPY=     117.91         117.94      -0.03%         -6.58%      +118.1500   +117.7600
 Dollar/Swiss     CHF=        0.9811         0.9835      -0.24%         -0.04%      +0.9877     +0.9811
 Sterling/Dollar  GBP=        1.2262         1.2250      +0.10%         -3.87%      +1.2267     +1.2196
 Dollar/Canadian  CAD=        1.3286         1.3302      -0.12%         -2.57%      +1.3338     +1.3287
 Australian/Doll  AUD=        0.6769         0.6756      +0.19%         -3.96%      +0.6771     +0.6737
 ar                                                                                             
 Euro/Swiss       EURCHF=     1.0902         1.0896      +0.06%         -3.13%      +1.0928     +1.0888
 Euro/Sterling    EURGBP=     0.9059         0.9041      +0.20%         +0.83%      +0.9080     +0.9038
 NZ               NZD=        0.6404         0.6363      +0.64%         -4.64%      +0.6407     +0.6366
 Dollar/Dollar                                                                                  
 Dollar/Norway    NOK=        8.9318         8.9776      -0.51%         +3.39%      +9.0137     +8.9333
 Euro/Norway      EURNOK=     9.9246         9.9449      -0.20%         +0.20%      +9.9744     +9.9273
 Dollar/Sweden    SEK=        9.6288         9.6767      -0.21%         +7.41%      +9.6983     +9.6305
 Euro/Sweden      EURSEK=     10.6991        10.7215     -0.21%         +4.24%      +10.7280    +10.7020
 
 (Reporting by Gertrude Chavez-Dreyfuss; Additional reporting by Olga Kotaga in London; editing by David
Gregorio and Jonathan Oatis)
  
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