September 17, 2019 / 2:19 PM / a month ago

FOREX-Dollar drifts lower 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

 (New throughout, updates prices, market activity, commens, adds FX table; new byline, changes dateline;
previous LONDON)
    By Gertrude Chavez-Dreyfuss
    NEW YORK, Sept 17 (Reuters) - The dollar dipped on Tuesday in choppy range-bound trading on the eve of
an expected U.S. interest rate cut from the Federal Reserve, but the greenback drew support from
geopolitical tensions.
    The dollar has fallen in three of the last four sessions, and is down so far this month.
    Investors were also watching 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.
    "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," he added.
    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 98.541.
    Geopolitical tensions supported the dollar.
    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.
    The euro was up 0.3% at $1.1030.
    Against the yen, the dollar was up 0.1% at 108.28 yen.
    
    ========================================================
    Currency bid prices at 9:58AM (1358 GMT)
 Description      RIC         Last           U.S. Close  Pct Change     YTD Pct     High Bid    Low Bid
                                              Previous                   Change                 
                                              Session                                           
 Euro/Dollar      EUR=        $1.1029        $1.1000     +0.26%         -3.84%      +1.1039     +1.0991
 Dollar/Yen       JPY=        108.2300       108.1200    +0.10%         -1.84%      +108.3600   +108.0300
 Euro/Yen         EURJPY=     119.39         118.95      +0.37%         -5.42%      +119.5000   +118.8800
 Dollar/Swiss     CHF=        0.9959         0.9925      +0.34%         +1.48%      +0.9968     +0.9914
 Sterling/Dollar  GBP=        1.2438         1.2428      +0.08%         -2.51%      +1.2443     +1.2394
 Dollar/Canadian  CAD=        1.3279         1.3235      +0.33%         -2.63%      +1.3298     +1.3234
 Australian/Doll  AUD=        0.6842         0.6864      -0.32%         -2.94%      +0.6870     +0.6831
 ar                                                                                             
 Euro/Swiss       EURCHF=     1.0985         1.0922      +0.58%         -2.39%      +1.0992     +1.0914
 Euro/Sterling    EURGBP=     0.8865         0.8848      +0.19%         -1.32%      +0.8889     +0.8849
 NZ               NZD=        0.6336         0.6343      -0.11%         -5.67%      +0.6349     +0.6323
 Dollar/Dollar                                                                                  
 Dollar/Norway    NOK=        8.9512         8.9599      -0.10%         +3.62%      +8.9818     +8.9405
 Euro/Norway      EURNOK=     9.8742         9.8593      +0.15%         -0.32%      +9.9046     +9.8568
 Dollar/Sweden    SEK=        9.6885         9.6558      +0.62%         +8.08%      +9.7286     +9.6530
 Euro/Sweden      EURSEK=     10.6885        10.6226     +0.62%         +4.14%      +10.7151    +10.6240
 
    
 (Reporting by Gertrude Chavez-Dreyfuss; Additional reporting by Saikat Chatterjee in London; Editing by
David Gregorio)
  
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