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Sterling hits six-week low, kiwi sours on dairy worries

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Sterling fell to a six-week low against the dollar on Tuesday while the New Zealand dollar dropped almost half a percent as thin summer currency markets marked time before a slew of U.S. data due later in the week.

Other major currency pairs were stuck in tight ranges, with the dollar holding close to six-month peaks against a basket of currencies ahead of data and policy releases starting with GDP and a Federal Reserve statement on Wednesday.

The yen weakened briefly past 102 yen per dollar, with some traders pointing to a warning from Russia that plans to impose sanctions would harm relations between Moscow and Tokyo.

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The kiwi was down almost 0.5 percent around $0.85, its weakest since June 10, after dairy giant Fonterra slashed its forecast payout to farmers in the new season by 14 percent.

New Zealand is the only developed world economy where interest rates have already risen, supporting solid gains for its dollar this year. Rates are expected to remain on hold until the end of 2014, however, as the central bank assesses the impact on growth and inflation.

Payrolls Wait

Stronger-than-expected UK mortgage data - which beat back recent signs of housing sector weakness - provided only a brief boost for the pound. Just below $1.7, its lowest since June 18, it is more than 2 cents off a near six-year high hit earlier in July.

While most analysts remain upbeat on Britain's economic prospects the feeling is growing that the pound's year-long rise, certainly against the dollar, may have come as far as it can.

The past fortnight has finally given some encouragement to those hoping for a sustained run higher for the dollar that might revive trading volumes and volatility. The latter, a key driver of profits for bank dealing rooms, have been stuck at long-term lows for months.

The Fed's policy statement on Wednesday, along with second quarter gross domestic product numbers and non-farm payrolls on Friday, offer the best hope of new direction on that move.

The dollar index, which measures the greenback's value against a basket of major currencies, held steady above 81.

The euro was steady above $1.34, pinned near an eight-month trough set on Friday.

—By Reuters

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