FOREX-Dollar slips as focus turns to expected US rate cut

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By Gertrude Chavez-Dreyfuss

NEW YORK, Dec 10 (Reuters) - The dollar slipped against most major currencies on Monday, reversing its recent strong gains ahead of a widely expected Federal Reserve interest rate cut this week.

Analysts are fully pricing in a quarter percentage-point easing in the Fed's benchmark rate to 4.25 percent when the central bank meets on Tuesday. But perceived chances of a bigger move have fallen to one-in-five from around 50-50 a week ago FEDWATCH.

"The market is front-running the expectation that the Fed is going to cut and we expect the dollar to remain pretty much weak before the FOMC (Federal Open Market Committee) decision," said Boris Schlossberg, senior currency strategist at DailyFX.com in New York.

In midday New York trading, the euro was up 0.3 percent at $1.4705 <EUR=>. It got a boost last week as comments by European Central Bank President Jean-Claude Trichet left open the possibility of higher rates next year.

Against the yen, the euro was up 0.4 percent at 164.30 yen <EURJPY=>.

"The ECB has fairly laid out that they're not turning dovish any time soon," said David Watt, senior currency strategist at RBC Capital Markets in Toronto.

"We had some expectations the previous week that rate cuts will actually be bullish for the U.S. dollar, but that seems to be evaporating now that the ECB may at least try to keep rates on hold and not cut them," he added.