* Weaker-than-expected U.S. data knocks dollar
* Treasury prices fall ahead of Fed
* Weaker dollar helps lift oil
* Sterling gains on reduced Brexit chances
(New throughout, changes dateline, previous LONDON)
By Dion Rabouin
NEW YOEK, April 26 (Reuters) - The dollar sank on Tuesday
after weaker-than-expected U.S. economic data boosted
expectations the Federal Reserve would hold interest rates lower
for longer, while U.S. Treasury yields touched five-week highs
as traders positioned ahead of the central bank's policy
statement.
U.S. durable goods orders rebounded less than expected in
March and a survey of American consumer confidence missed
expectations, adding to a slew of weak data on the U.S. economy
in the first quarter.
Tuesday's economic data "plays into the idea that the Fed
need not be in any rush to raise rates," said Richard
Franulovich, senior currency strategist at Westpac Banking
Corporation in New York.
Fed funds futures rates showed investors see no chance the
Fed will raise benchmark U.S. interest rates above the current
rate of 0.25 percent to 0.5 percent on Wednesday, and Tuesday's
weaker-than-expected data pushed back odds of any rate hike in
2016, analysts said.
"It is pretty much a given that the FOMC won't raise rates
at this meeting, and may not raise rates until the end of the
year," said Kevin Giddis, head of fixed income capital markets
at Raymond James in Memphis, Tennessee.
Markets see a 23 percent chance of interest rates rising in
June, according to CME Group's FedWatch.
The U.S. dollar index .DXY , which measures the dollar
against a basket of six major currencies, fell 0.45 percent to
94.458.
U.S. benchmark 10-year Treasury notes US10YT=RR slipped
7/32 in price to yield 1.925 percent, the highest level since
March 23.
World stocks were mixed, with Wall Street edging lower as
investors assessed quarterly earnings and awaited the outcome of
the Fed meeting.
The Dow Jones industrial average .DJI fell 14.45 points,
or 0.08 percent, to 17,962.79, the S&P 500 .SPX gained 1.52
points, or 0.07 percent, to 2,089.31 and the Nasdaq Composite
.IXIC dropped 9.39 points, or 0.19 percent, to 4,886.40.
European bourses edged higher, boosted by a
smaller-than-expected 80 percent first-quarter profit fall and
unchanged dividend from BP BP.L , as well as encouraging
results from pulp and paper maker UPM UPM1V.HE
Emerging markets indexes .MSCIEF rose along with Chinese
stocks .CSI300 , while Japan's Nikkei .N225 was lower on the
day.
The yen was flat JPY= , as investors weighed prospects of
more monetary stimulus this week from the Bank of Japan, which
begins a two-day meeting on Wednesday.
Late last week, the Japanese currency tumbled to three-week
lows on speculation the BOJ would introduce more easing
measures, but analysts said those expecting aggressive monetary
loosening may be disappointed.
Sterling strengthened to a 10-week high against the dollar
GBP=D4 , building on Monday's gains as investors bet more
heavily that Britons would vote to stay in the European Union at
a referendum in June, following a weekend visit from U.S.
President Barack Obama who urged Britain to remain in the
European Union. GBP/
"It looks as if there has been a change of sentiment," said
Esther Reichelt, an FX strategist with Commerzbank (DE:CBKG) in Frankfurt.
"The options market in general is pricing in less chance of a
big move around the Brexit vote and the market seems less
worried it will happen."
The weaker dollar and expectations that the global oil glut
would ease lifted oil prices.
Brent futures LCOc1 traded up 1.4 percent at $45.10, while
U.S. crude futures CLc1 gained 57 cents at $43.21 a
barrel. O/R
Both remained near five-month highs touched last week.