September 25, 2018 / 8:26 AM / in 3 months

FOREX-Euro struggles despite Draghi's inflation comments

* Euro struggles despite Draghi comments being seen as hawkish

* Dollar quiet ahead of two-day Fed meeting

* Most currencies shrug off trade war concerns for now

* Graphic: World FX rates in 2018 tmsnrt.rs/2egbfVh

By Tommy Wilkes

LONDON, Sept 25 (Reuters) - The euro struggled on Tuesday despite European Central Bank president Mario Draghi’s comments about “relatively vigorous” inflation in the previous session, while the dollar paused before the U.S. Federal Reserve’s policy meeting.

The euro hit a 3-1/2 month high on Monday after Draghi expressed confidence in euro zone inflation and wage growth, but the gains were temporary.

After initially rebounding on Tuesday, the single currency then turned lower - down 0.1 percent on the day at $1.1742 after the ECB’s chief economist Peter Praet said there was nothing new in Draghi’s comments.

Analysts, however, had largely interpreted Draghi’s speech as hawkish - euro zone money markets brought forward their expectations for a 10 basis point ECB rate hike to September from October 2019 - helping to underpin the single currency.

Broader currency markets were largely quiet as the latest round of tariffs in the U.S.-China trade conflict kept investors on edge, and with an expected Federal Reserve rate rise - the third in 2018 - mostly priced in by traders.

“There is a general lack of impulses. The market is not reacting (to the trade war) because we are not seeing any economic impact. The other big driver (of currencies) is usually monetary policy but the FOMC is going to be a non-event,” Thu Lan Nguyen, a strategist at Commerzbank in Frankfurt, said, referring to the Federal Open Market Committee’s two-day meeting that begins on Tuesday.

The dollar index, which measures the greenback against a basket of six major currencies, was flat at 94.165.

“The dollar remains the absolute go to currency when there is any question about risk or stability or any of these geopolitical situations,” said Bart Wakabayashi, Tokyo branch manager at State Street Bank.

“If we have negative news out of the Brexit talks, that’s going to be a huge push for the dollar...If we get some sort of more-than-expected hawkish sentiment out of (the Fed), that should be another push for the dollar,” Wakabayashi said.

Against the Japanese yen, the dollar gave up some of its gains but was still up 0.1 percent at 112.915 after the release of minutes from the Japanese central bank’s July policy meeting.

The minutes showed a few of the Bank of Japan’s board members said the central bank must consider more seriously the potential dangers of ultra-easy policy, such as the negative impact on the country’s banking system.

The Australian dollar, a proxy for China-related trades and a gauge of broader risk appetite, recovered to trade flat at $0.7251 after an earlier fall.

The Swiss franc, a currency often sought out when investors feel nervous, fell 0.2 percent to 1.1356 francs against the euro.

China’s offshore yuan, which has fallen heavily amid the trade dispute, rose 0.1 percent to 6.8626 yuan per dollar. (Additional reporting by Daniel Leussink in Tokyo; Editing by Kirsten Donovan)

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