* U.S. central bank to start two-day policy meeting
* Dollar down 1.3 pct over last 10 sessions
* Aussie trims gains after RBA minutes
* Graphic: World FX rates in 2019 (Adds context, graphics, updates prices)By Tom FinnLONDON, March 19 (Reuters) - The Japanese yen rose onTuesday, benefiting from a U.S. dollar hit by concern over theU.S. economy and expectations that the Federal Reserve willprove accommodative at a meeting this week.The euro also profited from the weaker dollar, adding 0.2percent to $1.1348 .Markets expect the Fed to strike a dovish tone when itmeets, and bets on an interest rate cut have increased afterweaker-than-expected manufacturing data on Friday. The U.S. currency, measured against a basket of rivals, hasweakened 1.3 percent in the last 10 days. On Tuesday, it fell0.2 percent to 96.415 The foreign exchange market has traded in a narrow rangethis week as caution prevails among investors ahead of the Fedmeeting but the Japanese yen, Monday's worst performing majorcurrency, has recovered.
The Australian dollar has gained the most from theU.S. dollar's retreat though it was hit by Reserve Bank ofAustralia minutes that expressed concern about the housingmarket. The New Zealand and Canadian dollar arealso performing well. "Assuming Washington does not turn more aggressive on tradein the near future, expect this more benign environment tocontinue and to allow local stories to win through ... ," INGanalysts said.Volatility in foreign exchange markets is at its lowest infive years and analysts say recent decisions by the Fed andother major central banks is contributing.
The broader theme for foreign exchange markets in recentdays has been oil,with the Mexican peso and the Russian rouble- both outperforming oil exporters - among the best performingcurrencies. The Norwegian crown is a notable exception in that regard asbullish bets are being trimmed ahead of Thursday's Norges Bankmeeting.Sterling gained, rising 0.4 percent to $1.3311. Ithad fallen overnight after the speaker of Britain's parliamentupended Prime Minister Theresa May's Brexit plans by ruling thatshe had to change her twice-defeated deal before offering it fora third vote.The Bank of England is expected to leave its interest rateoutlook unchanged at a policy meeting on Thursday because of theuncertainty over Britain's decision to leave the European Union.<^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^Dollar retreats, yen firms Federal Open Market Committee target rate projections ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^> (Additional reporting by Sujata Rao;Editing by Alison Williams)
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