News: FOREX-Euro fragile as Fed hike looms, Aussie hike bets retreat

The euro nursed losses on Wednesday after its sharpest drop in two weeks as a cut in Russian gas supply sent energy prices soaring, while the Australian dollar dipped with relief that inflation was not as hot as some investors had bet.

But most moves were modest as traders awaited a Federal Reserve policy announcement at 1800 GMT.

The euro EUR=EBS rose 0.3% to $1.0145 in Asia, not enough to recoup much of Tuesday's 1% slide as Europe's growth remains dependent on what are diminishing Russian gas flows.

The yen JPY=EBS was steady at 137.00 per dollar. Sterling crept 0.2% higher to $1.2053. The kiwi NZD=D3 was flat at $0.6230 and Australian dollar AUD=D3 fell 0.2% to $0.6923.

Australia's year-on-year core inflation hit 4.9% in June, miles above the central bank's target for 2-3% but not as bad as some investors had feared and rate hike bets were pulled back.

"The market has taken out the small chance of a 75 basis point increase ... I think that is the reason the Aussie has sold off a little, out of that relief," said Ray Attrill, head of FX strategy at National Australia Bank, adding that investors were positioned for an upside surprise.

Markets are now pricing a 85.7% chance of a 50 bps rate hike by the Reserve Bank of Australia next week, with 14.3% expecting a more muted 25 bps increase. 0#RBAWATCH

For the Fed, a 75 bps is priced in, with a 13% chance of a supersized 100 bps raise.

The focus will also be on the Fed's news conference at 1830 GMT for any hint on whether policymakers' resolve to hike further is waning as growth slows. FEDWATCH

"It's more of a wait-and-see rather than the expectation of a large surprise," said Galvin Chia, emerging markets strategist at NatWest Markets.

He expects the U.S. dollar to remain supported by safe haven flows over the longer term, amid a darkening global outlook.

Overnight data showed U.S. consumer confidence falling to a nearly 1-1/2 year low and new home sales slumping, while Walmart shares slid after the retailer issued a profit warning.

Last week European manufacturing data was soft. "Downside risks to the eurozone growth and broader growth concerns globally tends to suggest more dollar strength," Chia said.

The U.S. dollar index =USD stood at 107.08, not far below mid-July's 20-year high of 109.290. It gained 0.64% overnight, snapping three straight sessions of declines.

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	Currency bid prices at 0318 GMT 

 Description	  RIC		 Last		   U.S. Close  Pct Change	 YTD Pct	 High Bid	Low Bid 
											  Previous				   Change				  
											  Session											
 Euro/Dollar	   EUR=EBS	$1.0146		$1.0117	 +0.28%		 +0.00%	  +1.0147	 +1.0119 
 Dollar/Yen		JPY=EBS	136.9450	   136.9500	+0.01%		 +0.00%	  +137.1350   +136.8100 
 Euro/Yen		 																			 
 Dollar/Swiss	  CHF=EBS	0.9619		 0.9632	  -0.08%		 +0.00%	  +0.9628	 +0.9618 
 Sterling/Dollar   GBP=D3	 1.2052		 1.2030	  +0.20%		 +0.00%	  +1.2057	 +1.2030 
 Dollar/Canadian   CAD=D3	 1.2866		 1.2886	  -0.14%		 +0.00%	  +1.2888	 +1.2863 
 Aussie/Dollar	 AUD=D3	 0.6925		 0.6937	  -0.20%		 +0.00%	  +0.6958	 +0.6913 
 NZ				NZD=D3	 0.6231		 0.6228	  +0.04%		 +0.00%	  +0.6247	 +0.6227 
 Dollar/Dollar																				   

All spots FX= Tokyo spots AFX= Europe spots EFX= Volatilities FXVOL= Tokyo Forex market info from BOJ TKYFX

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World FX rates	https://tmsnrt.rs/2RBWI5E 

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