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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 http://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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