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The pound sterling was relegated to the background on Tuesday as investors feared that Boris Johnson, the favorite to become the UK's next prime minister, will trigger a "tough Brexit" from the European Union, widely regarded as a major risk for the British economy.
The euro has traded near the lows of the session because of rising expectations The president of the European Central Bank, Mario Draghi, will announce a rate cut in September at a political meeting that will be held later this week to keep inflation expectations on track.
In Asia, regional currencies were primarily dependent on the movements of major world units, although investors are alert to developments in China and the United States. trade negotiations.
The dollar was pegged against other major currencies as expectations of a Fed rate cut next week reduced Treasury yields.
Speculation about the likelihood of a Brexit without agreement and doubts about the extent to which large central banks will ease monetary policy are likely to set the tone for foreign exchange markets in the coming weeks, traders and badysts said .
"Johnson should become the new prime minister, so there is a good chance that Brexit will be difficult," said Takuya Kanda, general director of research at Gaitame.Com Research Institute.
"In the short term, the subsequent lows of the pound could be limited because the positions are already very short.In the medium term, confidence in the pound sterling will remain low."
The pound is trading at $ 1.2477, a low of the $ 1.2382 limit reached 27 months ago last week.
The pound sterling has fallen 3.5% against the dollar over the past three months due to uncertainty over how Britain will avoid an exit without EU approval.
The British Conservative party will announce Tuesday the results of the election of the president. Johnson should largely prevail, which would put him in a position to become prime minister on Wednesday.
There is growing speculation that Johnson will pull Britain out of the EU on Oct. 31 without a trade agreement in effect.
Hedge funds raised short positions on the pound sterling to a 10-month high on July 16, according to data from the Commodity Futures Trading Commission.
The euro remained stable at $ 1.1208 as traders were waiting for the ECB's political meeting and Draghi's comments at a press conference on Thursday.
Traders see a 43% probability that European policymakers will lower a key deposit rate of 10 basis points by 0.50% to combat the risks of global trade tensions.
Economists polled by Reuters are waiting for the ECB to modify its forecasts to pave the way for a rate cut in September.
The dollar has changed little at 107.91 yen. The dollar index was slightly higher at 97,314.
The US central bank is expected to broadly lower its target range of 2.25% to 2.2% by 25 basis points at a meeting that will end on July 31, but expectations for a larger 50 point reduction The bottom line has soared because of mixed signals from Fed policymakers.
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