September 17, 2019 / 3:05 PM / a month ago

FOREX-Dollar slips ahead of Fed rate decision

    * Market awaits 25 basis-point cut by the Fed
    * Investors also worried by spike in overnight rates
    * Graphic: World FX rates in 2019 tmsnrt.rs/2egbfVh

 (Updates prices, adds details on euro rise)
    By Gertrude Chavez-Dreyfuss
    NEW YORK, Sept 17 (Reuters) - The dollar fell on Tuesday in choppy range-bound trading on the eve of
an expected U.S. interest rate cut from the Federal Reserve, with markets anxious about an overnight spike
in dollar funding costs. 
    The overnight rate, or the cost for banks and Wall Street dealers to borrow dollars, surged
to 10% on Tuesday, the highest since at least January 2003, according to Refinitiv data.
    Analysts attributed quarterly corporate tax payments and settlement of $78 billion in Treasuries
supply for the spike on Monday in interest rates in the repurchase agreement (repo) market.
    "This morning's funding squeeze has put some upward pressure earlier in the dollar, but that is not
likely to be a longer-term driver," said Erik Nelson, currency strategist, at Wells Fargo Securities in
New York.
    He added that the reaction in the FX market after key events is not always cut and dry.
    "We also have the Fed tomorrow and market participants are marking time ahead of the decision. So it's
pretty much back and forth right now," Nelson said.
    Though investors expect a 25 basis points rate cut, some believe this may be the last rate cut for a
while absent more evidence of a U.S. economic slowdown. Money markets are pricing in about an 80%
probability of another rate cut by year end.
    "If the Fed does cut 25 bps, then we think it will be the last time until we really do see signs of
recession," Brown Brothers Harriman strategists said in a note.
    Against a basket of its rivals, the greenback edged 0.1% lower to 98.506.
    Geopolitical tensions on Monday supported the dollar against some currencies after weekend attacks on
a Saudi Arabian oil field. The yen, also a safe haven, also did well.
    Though oil prices pulled back slightly from Monday's four-month highs, they remained about 15% higher
than Friday's close on wariness that attacks on Saudi Arabian crude oil facilities could trigger a
military response.
    U.S. President Donald Trump said on Monday he did not want to go to war but also said Washington was
still investigating if Iran was behind the strikes.
    In other currencies, the euro was up 0.4% at $1.1030, catching a bid after an influential
survey showed a brightening in German investor confidence. The ZEW index improved to -22.5 in September
versus forecasts of -37 and the August reading of -44.1.
    Against the yen, the dollar was up 0.1% at 108.30 yen.
    
    ========================================================
    Currency bid prices at 10:47AM (1447 GMT)
 Description      RIC         Last           U.S. Close  Pct Change     YTD Pct     High Bid    Low Bid
                                              Previous                   Change                 
                                              Session                                           
 Euro/Dollar      EUR=        $1.1042        $1.1000     +0.38%         -3.72%      +1.1046     +1.0991
 Dollar/Yen       JPY=        108.2500       108.1200    +0.12%         -1.82%      +108.3600   +108.0300
 Euro/Yen         EURJPY=     119.56         118.95      +0.51%         -5.28%      +119.6400   +118.8800
 Dollar/Swiss     CHF=        0.9948         0.9925      +0.23%         +1.37%      +0.9968     +0.9914
 Sterling/Dollar  GBP=        1.2474         1.2428      +0.37%         -2.22%      +1.2479     +1.2394
 Dollar/Canadian  CAD=        1.3281         1.3235      +0.35%         -2.61%      +1.3298     +1.3234
 Australian/Doll  AUD=        0.6848         0.6864      -0.23%         -2.85%      +0.6870     +0.6831
 ar                                                                                             
 Euro/Swiss       EURCHF=     1.0988         1.0922      +0.60%         -2.36%      +1.0992     +1.0914
 Euro/Sterling    EURGBP=     0.8853         0.8848      +0.06%         -1.46%      +0.8889     +0.8849
 NZ               NZD=        0.6335         0.6343      -0.13%         -5.69%      +0.6349     +0.6323
 Dollar/Dollar                                                                                  
 Dollar/Norway    NOK=        8.9606         8.9599      +0.01%         +3.73%      +8.9818     +8.9405
 Euro/Norway      EURNOK=     9.8962         9.8593      +0.37%         -0.10%      +9.9046     +9.8568
 Dollar/Sweden    SEK=        9.6954         9.6558      +0.80%         +8.16%      +9.7286     +9.6530
 Euro/Sweden      EURSEK=     10.7080        10.6226     +0.80%         +4.33%      +10.7151    +10.6240
 
    
 (Reporting by Gertrude Chavez-Dreyfuss; Additional reporting by Saikat Chatterjee in London; Editing by
David Gregorio and Nick Zieminski)
  
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