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FOREX-Dollar retreats as markets rethink Fed rate bets, eye ECB hikes

    (Updates prices; adds comment, FX table, bullets)
    * U.S. rate hike bets pare back aggressive Fed tightening
    * Investors watching ECB annual forum in Sintra
    * Markets on lookout for euro zone price data later in week

    By Hannah Lang
    WASHINGTON, June 27 (Reuters) - The U.S. dollar struggled
versus its major rivals on Monday as softening inflation
expectations prompted a reassessment of the prospects for
aggressive interest rate hikes but volatile markets cushioned a
broader decline.
    Aggressive rate hike bets have boosted the dollar with an
index rising to a near two-decade high of 105.79 earlier this
month. But with some high-frequency data indicators showing
economic momentum starting to cool and a broader drop in
commodity prices, investors are becoming cautious.
    "It's hard for Wall Street to confidently say there is a
bottom in place, so a lot of traders are still looking to fade
whatever rallies emerge," said Edward Moya, senior market
analyst at OANDA.
    Against its rivals, the dollar edged 0.12% lower to
103.9. Earlier this month, it hit 105.79, its highest since late
    Futures pricing shows traders now anticipating the
U.S. Federal Reserve's benchmark funds rate stabilizing around
3.5% from March next year, a pullback from pricing in rates
zooming to around 4% in 2023.
    "Today is a consolidation day," said Marc Chandler, chief
market strategist at Bannockburn Global Forex LLC.
    "I think that we're just waiting for more data, and that
data comes out later this week," he added, pointing to a readout
expected on Friday detailing consumer prices in the euro zone.
    Meanwhile, the euro was buoyed by expectations that the
European Central Bank will soon raise interest rates for the
first time in more than a decade.
    "Everyone is looking forward to this first rate hike that
we're going to get from the ECB, and I think that the risks of a
dovish hike are fading," said Moya.
    The euro was up 0.27% at $1.0587.
    The euro led gainers versus the dollar as the
European Central Bank's annual forum on central banking in
Sintra, Portugal, got under way with ECB President Christine
Lagarde and U.S. Federal Reserve Chair Jerome Powell both
attending the meeting. Markets will watch for any signs of
future policy moves.
    Commodity currencies came under pressure on Monday as data
showed profits at China's industrial firms shrank again, albeit
at a slower pace, in May after a sharp fall in April.

    Elsewhere, Russia's rouble weakened in the interbank
market as Russia headed for its first sovereign default since
the Bolshevik revolution a century ago.
    Cryptocurrencies stumbled, with the world's biggest
cryptocurrency Bitcoin down 1.7% trading at $20,810.34.
It fell to as low as $17,588.88 earlier this month.
    Currency bid prices at 3:26PM (1926 GMT)
 Description      RIC         Last           U.S. Close  Pct Change     YTD Pct       High Bid    Low Bid
                                              Previous                   Change
 Dollar index                 103.9000       104.0300    -0.12%         8.610%        +104.2100   +103.6600
 Euro/Dollar                  $1.0587        $1.0558     +0.27%         -6.88%        +$1.0615    +$1.0550
 Dollar/Yen                   135.4450       135.2100    +0.17%         +17.66%       +135.5400   +134.5300
 Euro/Yen                     143.40         142.69      +0.50%         +10.04%       +143.4800   +142.0600
 Dollar/Swiss                 0.9562         0.9586      -0.22%         +4.85%        +0.9620     +0.9549
 Sterling/Dollar              $1.2278        $1.2273     +0.07%         -9.19%        +$1.2332    +$1.2239
 Dollar/Canadian              1.2878         1.2888      -0.07%         +1.86%        +1.2916     +1.2865
 Aussie/Dollar                $0.6925        $0.6941     -0.22%         -4.72%        +$0.6958    +$0.6906
 Euro/Swiss                   1.0122         1.0113      +0.09%         -2.38%        +1.0157     +1.0104
 Euro/Sterling                0.8621         0.8601      +0.23%         +2.63%        +0.8627     +0.8578
 NZ                           $0.6297        $0.6314     -0.29%         -8.01%        +$0.6326    +$0.6283
 Dollar/Norway                9.7880         9.8545      -0.57%         +11.23%       +9.8810     +9.7740
 Euro/Norway                  10.3671        10.3937     -0.26%         +3.54%        +10.4415    +10.3601
 Dollar/Sweden                10.0809        10.1325     -0.10%         +11.79%       +10.1422    +10.0480
 Euro/Sweden                  10.6734        10.6842     -0.10%         +4.29%        +10.7092    +10.6439

 (Reporting Hannah Lang in Washington; additional reporting by
Saikat Chatterjee in London; Editing by Muralikumar
Anantharaman, Jane Merriman and Susan Fenton)

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