By Richard Leong
NEW YORK (Reuters) - The dollar and euro were little changed on Monday as traders await decisions by the U.S. Federal Reserve and the European Central Bank on how much and how fast they may reduce interest rates, beginning with the ECB on Thursday.
Traders see about a 46% probability that European policymakers will lower a key deposit rate by 10 basis points to -0.50 basis point to combat risk from global trade tensions and anemic regional inflation, based on local interest rates markets.
"The market is just waiting for what Draghi has to say about policy," said Brendan McKenna, currency strategist at Wells Fargo Securities, referring to ECB President Mario Draghi.
Rising chances of European interest rates sliding deeper into negative territory pressured the euro lower against the dollar and propelled the Swiss franc to a two-year peak against the single currency.
The greenback has been bogged down by bets the Federal Reserve will likely cut U.S. interest rates for the first time in a decade, also in response to global trade tensions and weak inflation. Data published late on Friday showed speculators dialed back their net bullish positions in the dollar against other G10 currencies to their lowest level in a year.
(GRAPHIC - Net speculative U.S. dollar positioning: https://tmsnrt.rs/32FPnYI)
In late U.S. trading, the euro
The dollar moved lower in step with U.S. yields. The two-year Treasury yield
An index that tracks the greenback against a basket of currencies <.DXY> was fractionally higher at 97.241.
U.S. rates futures implied traders positioned for a 23% chance the U.S. central bank may lower its rate range by a bold half point at its July 30-31 policy meeting, compared with 24% late on Friday, according to CME Group's FedWatch tool.
"It doesn't look like they will be too aggressive with a cut next week," McKenna said. "This is more of an insurance cut and not a start of a prolonged easing cycle. The U.S. economy is still pretty strong."
(GRAPHIC - Bets on bold first rate-cut from the Fed: https://tmsnrt.rs/2XTkkpn)
Rates futures had rallied on Thursday with perceived chances for a half-point rate cut soaring to 71% after a dovish speech by New York Fed President John Williams. Those bets abated after a Fed spokesman clarified that the remarks did not refer to "potential policy actions."
On Monday the yen did not move much, at 107.88 versus the dollar
The Swiss franc
(GRAPHIC - Swiss franc vs euro: https://tmsnrt.rs/32LkdiS)
(Reporting by Richard Leong; Additional reporting by Tommy Wilkes in London; Editing by Leslie Adler)