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FOREX-Dollar falls against yen as investors reassess U.S. rate hike outlook

    (Updates to early U.S. trading, changes byline, dateline, previous LONDON)
    * Dollar at lowest level since mid-June against yen
    * Aussie dollar up
    * Euro also gains as dollar falls

    By Caroline Valetkevitch
    NEW YORK, Aug 1 (Reuters) - The U.S. dollar was at its lowest level since mid-June against the Japanese
yen on Monday as investors weighed the likelihood that the Federal Reserve will not raise interest rates as
aggressively as some had expected.
    The U.S. dollar index was volatile after data showed U.S. manufacturing activity slowed less than
expected in July. But a key report for investors this week will be the U.S. jobs report on
    "It's the beginning of a new month, and the real focus is on the possibility that the Fed slows down its
rate hikes," said Marc Chandler, chief market strategist at Bannockburn Global Forex in New York.
    "The big focus is on the jobs market at the end of the week, and that's likely to confirm that the
improvement in the labor market is moderating," he said. "But pre-COVID, it would still be regarded as a
very robust number."
    The dollar index is up about 10% for the year so far following investor expectations of aggressive Fed
rate hikes.
    "After a big move, I think we're really consolidating," Chandler said.
    Last week, the dollar crumbled against the yen, and two-year yields in the U.S. Treasury market also
fell, after data showed the U.S. economy shrank for a second straight quarter.
    The dollar sank to its lowest level versus the yen since mid-June, and was down from a late
1998 peak of nearly 140 yen which it hit last month. The dollar was last down 1.1% at 131.74.
    The dollar index was last at 105.26, down 0.7%.
    The broad weakness in the dollar helped the euro, which was up 0.5% at $1.0273.
    Currency investors were also watching news on U.S. House of Representatives Speaker Nancy Pelosi's
expected visit to Taiwan. Pelosi was set to visit Taiwan on Tuesday, two people briefed on the matter said,
according to a Reuters report. China has warned that its military would never "sit idly by" if she visited
the self-ruled island claimed by Beijing.
    The Aussie dollar rose 0.6% to $0.7036 before a central bank rate hike on Tuesday.

    Currency bid prices at 11:44AM (1544 GMT)
 Description      RIC         Last           U.S. Close  Pct Change     YTD Pct       High Bid    Low Bid
                                              Previous                   Change
 Dollar index                 105.2600       105.9900    -0.67%         10.032%       +106.0100   +105.2300
 Euro/Dollar                  $1.0273        $1.0227     +0.46%         +0.00%        +$1.0275    +$1.0195
 Dollar/Yen                   131.7350       133.2200    -1.14%         +0.00%        +133.5550   +131.6000
 Euro/Yen                     135.33         136.19      -0.63%         +0.00%        +136.3400   +135.0200
 Dollar/Swiss                 0.9484         0.9518      -0.34%         +0.00%        +0.9531     +0.9483
 Sterling/Dollar              $1.2269        $1.2184     +0.72%         +0.00%        +$1.2292    +$1.2165
 Dollar/Canadian              1.2829         1.2796      +0.26%         +0.00%        +1.2831     +1.2767
 Aussie/Dollar                $0.7036        $0.6991     +0.63%         +0.00%        +$0.7047    +$0.6969
 Euro/Swiss                   0.9744         0.9728      +0.16%         +0.00%        +0.9758     +0.9714
 Euro/Sterling                0.8372         0.8393      -0.25%         +0.00%        +0.8399     +0.8356
 NZ                           $0.6345        $0.6290     +0.85%         +0.00%        +$0.6352    +$0.6278
 Dollar/Norway                9.5950         9.6700      -0.73%         +0.00%        +9.6860     +9.5880
 Euro/Norway                  9.8627         9.8783      -0.16%         +0.00%        +9.9240     +9.8402
 Dollar/Sweden                10.0837        10.1386     -0.12%         +0.00%        +10.1913    +10.0762
 Euro/Sweden                  10.3573        10.3699     -0.12%         +0.00%        +10.4065    +10.3473

 (Additional reporting by Saikat Chatterjee in London; Editing by Jan Harvey, Jane Merriman and Paul Simao)

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