Market News

By Jaspreet Kalra and Gregor Stuart Hunter

SINGAPORE/MUMBAI (Reuters) -The dollar steadied after a volatile start on Tuesday as U.S. President Donald Trump's unprecedented move to fire Federal Reserve Governor Lisa Cook renewed concerns over the central bank's independence.

The euro and sterling were little changed against the dollar at $1.1617 and $1.3461, respectively, in line with muted moves in other currencies such as the Japanese yen and Swiss franc.

The dollar index, which measures the U.S. currency against six others, was flat at 98.42, recovering from a fall of as much as 0.4% after Trump made the announcement in a letter to Cook that he posted on social media.

The move marks a sharp escalation of Trump's battle against the Fed. The president has repeatedly berated Fed Chair Powell for not lowering interest rates, though has stopped threatening to fire him ahead of the end of his term in a little under 9 months.

"The story has been well-telegraphed," said Kenneth Broux, head of corporate FX and rates research at Societe Generale, referring to Trump's push for lower benchmark borrowing costs.

In the letter, Trump said he was firing Cook over alleged improprieties in obtaining mortgage loans. In response, Cook said Trump has no authority to fire her from the central bank, and she will not resign.

Money markets are currently pricing in a near 82% probability of a rate cut at the Fed's September meeting.

While investors may be inclined to sell the dollar, lingering economic and fiscal worries in Europe also narrow the available currencies to bet on a decline in the U.S. currency, Broux said.

France's government bonds fell as the country's minority government looked increasingly likely to be ousted next month, with main opposition parties saying they would not back a confidence vote announced by Prime Minister Francois Bayrou over his plans for sweeping budget cuts.

The 10-year government bond yield rose around 4 basis points to 3.53%, its highest since March. Bond yields move inversely to prices.

"The broader question for the euro is whether recent French news destabilises appetite for the euro more broadly, or whether this is an isolated French issue," analysts at ING said in a note.

China's offshore yuan changed hands at 7.1635 per dollar, trading near the strongest level in a month, as a stock market rally gathered steam.

Cryptocurrencies remained choppy with bitcoin last up 0.5%, attempting to break a three-day losing streak, while ether climbed 1.5%.

(Reporting by Jaspreet Kalra and Gregor Stuart HunterEditing by Sam Holmes, Kirsten Donovan)