* Graphic: World FX rates in 2019 http://tmsnrt.rs/2egbfVh
By Saikat Chatterjee
LONDON, July 12 (Reuters) - The dollar edged lower for athird consecutive day on Friday as stronger-than-expected U.S.inflation data failed to shake convictions that the FederalReserve will start cutting interest rates at a policy meetinglater this month.
Against a basket of other currencies, the dollar fell0.1% to 96.94 and was on track for its biggest weekly drop inthree weeks.
The core U.S. consumer price index, excluding food andenergy, rose 0.3% in June, the largest increase since January2018, data on Thursday showed.
The reading pushed U.S. Treasury yields higher, but moneymarkets still indicated one rate cut at the end of July and acumulative 64 basis points in cuts by the end of 2019.
"Cutting interest rates when inflation data is weakeningmakes sense, but signaling a dovish stance when inflation isrising is a bit weird and suggests there are political pressuresweighing on the Fed," said Ulrich Leuchtmann, the head ofcurrency research at Commerzbank.
The dollar's weakness revived carry trades, where hedgefunds borrow in low-yielding currencies such as the Swiss francand the euro to purchase higher-yielding ones such as theAustralian dollar or the kiwi dollar.
On Friday, the Australian dollar/Swiss franc crosswas up a quarter of a percent. The Kiwi dollar gained 0.3% to$0.6665.
The euro got a boost from a selloff in the Germanbond market, rising 0.1% to $1.1270.
Comments by Chicago Fed President Charles Evans scheduledlater on Friday and New York Fed President John Williams onMonday will provide a chance to gauge how dovish the centralbank is, said Masafumi Yamamoto, chief forex strategist atMizuho Securities.
"If these Fed officials are not as dovish as Powell, and ifthe New York Fed's manufacturing survey on Monday provesstronger than forecast, they could show that the dollarweakening in response to Powell's congressional testimony wasoverdone."
(Reporting by Saikat Chatterjee, additional reporting byShinichi Saoshiro in Tokyo; editing by Larry King)