* Graphic: World FX rates in 2019
By Daniel Leussink
TOKYO, May 24 (Reuters) - The dollar was on track on Friday to
post a small weekly loss after coming off two-year highs on lower U.S.
yields as investors feared the Sino-U.S. trade dispute will hurt the
U.S. economy more than previously thought.
Another factor keeping the greenback down was rising expectations
the Federal Reserve will cut U.S. interest rates later this year to
boost the world's biggest economy.
Against a basket of key rival currencies , the dollar was
largely unchanged at 97.878, having fallen from a two-year high of
98.371 overnight. That put the dollar on track for a 0.12% loss this week.
Masafumi Yamamoto, chief currency strategist at Mizuho
Securities, said that due to U.S.-China trade tensions, "markets
are pricing in the potential negative impact" on the U.S. economy
and the U.S. equities.
President Donald Trump on Thursday said U.S. complaints against
Huawei Technologies Co Ltd might be resolved within the framework
of a U.S.-China trade deal, while at the same time he called the
Chinese telecommunications giant "very dangerous."
The 10-year U.S. Treasury note yield was last up slightly at 2.327%.
On Thursday, it fell to its lowest since October 2017 after an
early read on U.S. manufacturing activity for May showed the weakest
pace of growth in almost a decade, suggesting a sharp slowdown in
economic growth was under way.
There was only a 38.4% expectation on Thursday that U.S. interest
rates will be at current levels in October, compared to 58.3% a month
ago, according to the CME Group's FedWatch tool.
"Markets are pricing in a rate cut as damage from the trade
tension is thought to be larger than imagined, though the Fed hasn't
talked about it at all," said Yukio Ishizuki, senior currency
strategist at Daiwa Securities.
"The Trump administration is expected to put a fair amount of
pressure on the Fed from now on. Investors are thinking about a
rate-cut scenario without the Fed giving in to that."
Against the yen, the dollar edged down to 109.59 yen , extending
losses overnight, when it gave up two-thirds of a percent, its
steepest drop in a single session in two months.
"Global risk aversion stemming from the intensifying
U.S.-China trade tension is causing the stronger yen," said
The greenback is still 0.5% above a three-month trough of 109.02
yen touched on May 13.
The Australian dollar was off 0.2% at $0.6884 after the chief
economist of Westpac Banking Corp said he expects three central bank
rate cuts this year, one more than the market consensus for two
The Aussie still remained on track to finish the week with a small
gain, its first advance in six weeks.
The euro was flat at $1.1181 , having bounced from a two-year
low of $1.11055 during the previous session.
The single currency came under pressure after a private survey
showed activity in Germany's services and manufacturing sectors fell
in May, aggravating fears about the effect of unresolved trade
disputes on Europe's largest economy.
Compounding these worries, European parliamentary elections began
on Thursday with eurosceptic parties expected to do well, raising
concerns about the single currency's stability.
(Reporting by Daniel Leussink; Editing by Darren Schuettler and
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