FOREX-Dollar mostly weaker on bets on U.S. rate cuts

FOREX - NEW YORK, June 25 (Reuters) - The dollar fell against most major currencies on Tuesday, hitting a three-month low against the euro, as expectations of multiple decreases of U.S. interest rates by the Federal Reserve have spurred selling of the U.S. currency.

Growing tensions between Iran and the United States stoked fresh safe-haven buying of the yen, which reached its strongest levels against the greenback since early January. 

Last week's signal from the U.S. central bank that it was ready to lower borrowing costs to counter slowing domestic growth and sluggish inflation caused traders to exit
their earlier bullish positions on the dollar, analysts said.

Falling U.S. bond yields and bearish technical indicators have stoked the view the greenback would have more room to fall in the coming months, analysts said.

"This has more legs to go," said Paresh Upadhyaya, director of currency strategy at Amundi Pioneer Investments in Boston.

The dollar found respite from comments from St. Louis Fed President James Bullard to Bloomberg Television, who had argued for a rate-cut last week, that an aggressive 50
basis-point rate cut at next month's meeting "would be overdone."

At a public event in New York, Fed Chairman Jerome Powell said the central bank was wrestling with whether to cut rates due to possible drag on the economy from escalating trade tensions.

"Powell wants to wait and see because he admits changes have been very rapid," said Juan Perez, senior currency trader at Tempus, Inc in Washington.

Interest rate futures implied traders fully priced in a quarter-point rate cut from the Fed next month and saw a high rising probability of at least two more cuts after July.

In late U.S. trading, the dollar was down 0.14% at 107.145 yen after hitting 106.78 yen during Asian trading, which was its weakest since Jan. 3.

Demand for the yen was underpinned by new U.S. sanctions against Iran's supreme leader and foreign minister. Iran said on Tuesday the move had closed off diplomacy between the two countries.

The greenback was 0.32% lower versus the pound. It was modestly weaker against the Canadian and New Zealand dollars.

On the other hand, the euro was down 0.22% at $1.1373. The single currency retreated from $1.1412 earlier Tuesday, which was its highest since March 21.

The dollar index moved closer toward its 200-day moving average at 96.131 based primarily on a subsequent weakening of the euro.

Investors are monitoring whether U.S. President Donald Trump and Chinese President Xi Jinping will at least call a truce in their trade war when they meet at a summit of the
G20 major economies in Osaka, Japan, later this week.

Trump considers his meeting with Xi an opportunity to "maintain his engagement" and see where China is on the trade dispute, a senior U.S. official said on Monday.
        
(Additional reporting by Tommy Wilkes in London; Editing by Tom Brown)