FOREX-Dollar catches breath after plunging on collapse of US healthcare bill

Reuters
* Fading expectations of US rate hike by year-end hit dollar
    * Bank of Japan seen dialling back its inflation target
    * ECB likely to hold steady, could tweak language

    By Lisa TwaroniteTOKYO, July 19 (Reuters) - The dollar nursed losses on
Wednesday after skidding to a 10-month low against a currency
basket as Republican legislators' failure to pass a stalled
healthcare bill raised fears for the rest of President Donald's
Trump reform agenda.
    Republican efforts to overhaul or repeal Obamacare collapsed
in the U.S. Senate on Tuesday, rattling financial markets and
casting doubt on the chances of getting Trump's economic plans,
such as tax reform and stimulus, through a divided
Congress.[nL1N1K90GB]
    The dollar index, which tracks the greenback against a
basket of six major rivals, edged up 0.2 percent to 94.780
<.DXY> after falling as low as 94.476 on Tuesday, its lowest
level since September 2016.
    The euro inched 0.2 percent lower to $1.1534 , after
rising as high as $1.1583 on Tuesday, its highest since May
2016.
    The European Central Bank will hold a policy meeting on
Thursday, with participants seen likely to adjust their language
as they edge the ECB towards normalising policy.
    Such adjustments may include dropping a reference to the
bank's readiness to increase the size or duration of its
asset-purchase programme before announcing in the autumn how and
when it will start winding down its bond-buying. [nL8N1K523W]
    The ECB, keen to retain flexibility in case the outlook
sours, is set to keep its asset purchases open-ended rather than
setting a potentially distant date on which bond-buying will
stop, three sources familiar with the discussion said.
[nL8N1K43T0]
    ECB President Mario Draghi roiled markets last month when he
opened the door to potential adjustments to the quantitative
easing programme.
    "For the ECB, the market has shifted its expectations
somewhat in recent weeks, especially following Draghi's comments
which were taken to be more hawkish," said Mitul Kotecha, head
of Asia macro strategy for Barclays in Singapore.
    "To this extent, there's a lot already priced in, in terms
of both the euro and expectations of ECB policy," he said. "The
attention is on whether that is sustained in terms of what
Draghi was saying, or whether we'll see some reassessment."
    Expectations that the Federal Reserve will be more cautious
about raising interest rates also weighed on the greenback.
    Economic data on Tuesday showed U.S. import prices falling
for a second straight month in June as the cost of petroleum
products declined further, suggesting inflation pressures could
remain weak for a while. [nL1N1K80QC]
    Fed Chair Janet Yellen signalled caution in congressional
testimony last week, with disappointing U.S. inflation and
retail sales data on Friday adding to evidence that the central
bank has reason to take its time in tightening. [nL1N1K30F8]
[nL1N1K50H3]
    "The failure of the healthcare bill added the newest
pressure to the dollar, but it was already under pressure after
Yellen's comments last week," said Mitsuo Imaizumi, Tokyo-based
chief foreign exchange strategist for Daiwa Securities.
    The Fed chief referred to "uncertainty," he said, a word
that "makes markets nervous," and prompted them to pare their
expectations of another interest rate hike this year, he said.
    The dollar was flat against its Japanese counterpart at
112.065 yen , well below its nearly four-month high of
114.495 touched last week. It fell as low as 111.685 on Tuesday,
its lowest since June 27.
    The Bank of Japan will also conclude a policy meeting on
Thursday. Policymakers are expected to raise their economic
growth forecasts but cut their rosy inflation outlook, sources
say, reinforcing expectations it will lag well behind major
global central banks in dialling back its massive stimulus
programme. [nL4N1K4410]
    A majority of economists polled by Reuters expect the BOJ to
delay again its projected timing for achieving the 2 percent
inflation target. [nL3N1K83ZZ]
    The Australian dollar was up 0.2 percent to $0.7926 
after surging to two-year highs on Tuesday as minutes of the
last meeting of the country's central bank showed policymakers
turned more upbeat on the economic outlook. [nL3N1K91G4]
    The dollar edged down 0.2 percent against the Mexican peso
to 17.446 after credit ratings agency Standard & Poor's on
Tuesday revised Mexico's sovereign credit outlook up to "stable"
from "negative," and commended the government's efforts to rein
in a surge in debt. [nL1N1KA03W]


 (Reporting by Lisa Twaronite; Editing by Kim Coghill and Eric
Meijer)
 ((lisa.twaronite@thomsonreuters.com;)(+81 3 6441 1870; Reuters
Messaging: lisa.twaronite.thomsonreuters.com@reuters.net))

Keywords: GLOBAL FOREX/ (UPDATE 1)
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