FOREX-Dollar eases ahead of central bank bonanza, eyes on Fed

By Rae Wee

SINGAPORE, Sept 15 (Reuters) - The dollar slipped on Monday ahead of a pivotal week filled with central bank decisions headlined by the Federal Reserve, while the euro hardly reacted to Fitch's downgrade of France's credit rating.

Trading in Asia was thinned with markets in Japan closed for a holiday, leaving currencies mostly rangebound over the course of the session.

The euro EUR=EBS came under slight pressure and last traded 0.04% lower at $1.1729, though investors largely shrugged off Friday's announcement from Fitch downgrading France's sovereign credit score to the country's lowest level on record.

The move strips the euro zone's second-largest economy of its AA- status as it grapples with political crisis and ballooning debt.

Still, much of investors' attention this week will be on the slew of rate decisions in the U.S., Japan, United Kingdom, Canada and Norway that could set the tone for markets, with the Fed taking centre stage.

Expectations of a rate cut from the Fed on Wednesday have weighed on the dollar in recent times, and it declined 0.08% against a basket of currencies to 97.58 =USD on Monday.

Sterling GBP=D3 rose 0.11% to $1.3565, while the Aussie dollar AUD=D3 rose 0.23% to $0.6663, flirting with a 10-month high hit on Friday.

"We are calling for a 25-basis-point cut from the FOMC this week, which is more than fully priced," said Carol Kong, a currency strategist at Commonwealth Bank of Australia.

Just as important will be Fed members' "dot plot" projections for rates and guidance from Fed Chair Jerome Powell on the extent and pace of any further easing.

"In order to have an impact on currencies, Powell will have to out-dove the market by giving quite explicit hints about follow-up rate cuts. And if the FOMC does deliver an outsized 50-basis-point cut, that could also push the dollar down quite significantly, unless he suggests that there is a limited chance of follow-up cuts," said Kong.

Elsewhere, the yen JPY=EBS strengthened more than 0.1% to 147.44 per dollar, ahead of the Bank of Japan's (BOJ) policy meeting later in the week.

While the BOJ is expected to stand pat on rates, focus will similarly be on comments from Governor Kazuo Ueda on the future policy path.

"The JPY continues to underperform in the near-term undermined by the pick-up in political uncertainty in Japan after PM Ishiba resigned," said analysts at MUFG in a note.

"The BOJ would have to provide a signal that a rate hike could be delivered as soon as next month to trigger a reversal of JPY weakness."

In other currencies, the New Zealand dollar NZD=D3 was up 0.15% to $0.5964.

The onshore yuan CNY=CFXS got a slight lift from a weaker greenback and last stood at 7.1213 per dollar, despite Monday's grim economic data which showed China's factory output and retail sales in August logged their weakest growth since last year.

Also on investors' radars were talks between U.S. and Chinese officials.

They concluded a first day of talks in Madrid on Sunday on their strained trade ties and a looming divestiture deadline for Chinese short-video app TikTok, amid Washington's demands that its allies place tariffs on imports from China over its purchases of Russian oil.