* Big week for policy meetings begins with ECB
* Dollar up vs euro on safe-haven demand
* Swiss franc reaches two-year high, pulls back
* Graphic: World FX rates in 2019 http://tmsnrt.rs/2egbfVh
By Tommy Wilkes
LONDON, July 22 (Reuters) – Foreign-exchange markets started the week waiting to see how much and how fast policymakers might ease policy, beginning with the European Central Bank on Thursday.
The euro weakened to $1.12 in Asian trading as the dollar gained on safe-haven demand amid rising tensions in the Middle East.
Positioning data published last week showed that investors remain net long of dollars, unchanged from the previous week.
Foreign exchange has been stuck in trading ranges in recent weeks, with expectations for easing by both the Federal Reserve and the ECB more or less cancelling out the impact on the euro and the dollar.
Pricing for a 50-basis-point Fed cut soared last week after a dovish speech by New York Fed President John Williams. Those expectations later dwindled after a Fed spokesman clarified that the remarks did not refer to “potential policy actions”.
Priced-in forecasts for a 50-basis-point cut have dropped from as high as 71% last week to 18.5% on Monday.
The Fed holds its monetary policy meeting next week, as does the Bank of Japan.
“FX markets don’t tend to get too excited about monetary policy when it’s all nuance and forward guidance, but when central banks are making actual rate moves and QE adjustments, monetary policy becomes the driving theme,” BMO Capital Markets strategist Stephen Gallo said.
The euro nudged lower to $1.1217 after earlier reaching $1.1208 in Asian trading. The dollar index rose 0.1% to 97.199.
Analysts said the dollar was benefiting from a confrontation in the Strait of Hormuz, the oil trade’s most important waterway. Footage showed the Iranian military defying a British warship to seize a tanker on Friday.
The dollar rose 0.2% against the yen to 107.91 after earlier breaching the 108 level.
The Swiss franc pulled back after rising to another two-year high against the euro. By 0730 GMT, it had shed 0.1% to 1.1023 after earlier plumbing 1.1013 francs per euro.
Sterling dipped below $1.25, losing 0.2% to $1.2483 as investors waited to see whether Boris Johnson would win the Conservative party leadership contest, as expected.
“We’re likely to be marking time ahead of those big risk events later in the week,” National Australia Bank FX Strategist Rodrigo Catril said. “The market is still licking its wounds post Fed Williams’ backtracking.” (Additional reporting by Tom Westbrook in Sydney, editing by Larry King)