* Investors brace for dovish Fed at Jackson Hole
* U.S. yield curve steeper, but may invert again
* Pound plunges vs euro, dollar
* Euro flat as markets focus on Italy
* Graphic: World FX rates in 2019 http://tmsnrt.rs/2egbfVh (Recasts, updates prices, adds new comment, FX table, changes byline, dateline)
By Gertrude Chavez-Dreyfuss
NEW YORK, Aug 20 (Reuters) - The dollar fell against major currencies on Tuesday, in line with the drop in Treasury yields, as investors braced for a potentially dovish Federal Reserve at a Jackson Hole, Wyoming, gathering later this week, with many expecting an announcement of some measure that would ease U.S. recession concerns.
The greenback rose on Monday against the likes of the safe-haven yen and Swiss franc as risk appetite improved on the prospect of new stimulus measures from global central banks to shore up their struggling economies.
That mood in the market did not last, with a bit of risk aversion creeping in on Tuesday. That said, market sentiment was not as distressing as that of last week, when the U.S. bond yield curve inverted, a sign that many investors say presages a recession.
The curve of 2-year and 10-year Treasury yields, however, remained steeper on Tuesday, but could invert again based on past cycles.
"Market expectations for Jackson Hole and the central banking community in aggregate are extremely dovish," said Brad Bechtel, managing director at Jefferies in New York. "The U.S. market is pricing a tremendous amount of easing now, along with many other markets around the world. The market is literally trying to force the hand of the central banking community."
In morning trading, the dollar fell 0.4% against the yen to 106.235 yen and was down 0.2% versus the Swiss franc at 0.9798 franc.
The dollar index was little changed at 98.370 after earlier rising to a 2-1/2-week high of 98.40. It reached its 2019 high of 98.932 at the beginning of the month.
Against the euro, the dollar was slightly up, with the single currency down 0.1% at $1.1069 amid concerns over political developments in Italy.
Elsewhere, a stronger dollar pushed the offshore Chinese yuan lower, matching a six-day low of 7.0770. The offshore yuan was last trading neutral at 7.0702.
The pound was down by 0.4% both against the dollar and the euro, last at $1.2088 and at 91.59 pence against the euro.
British Prime Minister Boris Johnson made new waves by writing to European Council President Donald Tusk on Monday to propose replacing the Irish border backstop with a commitment to put in place alternative arrangements by the end of a post-Brexit transition period.
Johnson will meet both French President Emmanuel Macron and German Chancellor Angela Merkel during the week and is also planning to meet Irish Prime Minister Leo Varadkar in September.
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Currency bid prices at 9:52 AM (1352 GMT)
Description RIC Last U.S. Close Pct Change YTD Pct High Bid Low Bid
Previous Change
Session
Euro/Dollar EUR= $1.1074 $1.1076 -0.02% -3.44% +1.1088 +1.1067
Dollar/Yen JPY= 106.2500 106.6200 -0.35% -3.64% +106.6800 +106.1900
Euro/Yen EURJPY= 117.69 118.11 -0.36% -6.76% +118.2600 +117.5900
Dollar/Swiss CHF= 0.9799 0.9814 -0.15% -0.15% +0.9818 +0.9787
Sterling/Dollar GBP= 1.2089 1.2125 -0.30% -5.24% +1.2138 +1.2065
Dollar/Canadian CAD= 1.3337 1.3323 +0.11% -2.20% +1.3344 +1.3308
Australian/Doll AUD= 0.6776 0.6762 +0.21% -3.87% +0.6795 +0.6755
ar
Euro/Swiss EURCHF= 1.0854 1.0875 -0.19% -3.56% +1.0881 +1.0846
Euro/Sterling EURGBP= 0.9159 0.9133 +0.28% +1.95% +0.9183 +0.9133
NZ NZD= 0.6417 0.6409 +0.12% -4.47% +0.6428 +0.6404
Dollar/Dollar
Dollar/Norway NOK= 9.0171 8.9755 +0.46% +4.38% +9.0209 +8.9701
Euro/Norway EURNOK= 9.9869 9.9465 +0.41% +0.82% +9.9903 +9.9420
Dollar/Sweden SEK= 9.7294 9.6849 +0.43% +8.54% +9.7328 +9.6776
Euro/Sweden EURSEK= 10.7757 10.7297 +0.43% +4.99% +10.7791 +10.7230