* Graphic: World FX rates in 2019 http://tmsnrt.rs/2egbfVh
* Dollar on front foot after Powell rules out several rate cuts
* Powell's comments disappointed expectations for dovish tone
* Sterling at weakest in over 2 years ahead of BoE meeting (Adds details on Treasuries, Chinese yuan)
By Stanley White
TOKYO, Aug 1 (Reuters) - The dollar rose to a two-year peak against the euro and jumped to a two-month high versus the yen on Thursday as U.S. Federal Reserve Chairman Jerome Powell ruled out a lengthy easing cycle after delivering the first rate cut since the financial crisis.
In a widely expected move, the U.S. central bank cut rates by 25 basis points to shore up the economy against risks including trade friction.
At a press conference after the Fed's decision, Powell said "it's not the beginning of a long series of rate cuts." At the same time, he said, "I didn't say it's just one rate cut."
Traders still see one more rate cut this year. Powell's remarks, however, slashed expectations the Fed is prepared to lower rates well into next year.
"The comments by Powell were not particularly dovish, so this is confirmation that this is a small insurance cut," said Masafumi Yamamoto, chief currency strategist at Mizuho Securities in Tokyo.
"This outcome limits the dollar's downside from here. Rate cuts will be on the small side, but this still strengthens the case for a prolonged U.S. economic expansion, which is positive for the dollar long term."
The euro fell to fell to $1.1034, the lowest since May 16, 2017, before paring losses to trade down 0.2% at $1.1045.
Against the yen the dollar broke through an important resistance level at 109.00 yen to reach a two-month high of 109.35 yen.
The dollar index against a basket of six major currencies rose 0.3% to a two-year high of 98.932.
The dollar's gains quickly accelerated versus the yen early in Asian trading in response to a flattening of the U.S. Treasury yield curve and a rise in 10-year Treasury yields from lows set in New York trading.sonos sonos One (Gen 2) - Voice Controlled Smart Speaker with Amazon Alexa Built-in - Black read more
While financial markets had widely expected the Fed to reduce its key overnight lending rate by 25 basis points to a target range of 2.00% to 2.25%, many traders had looked for clearer confirmation of more rate cuts from Powell.
A day prior to the Fed's meeting, traders had forecast a 35% chance of three cuts by the end of the year. On Wednesday afternoon that figure had fallen to 12%, according to CME Group's FedWatch tool.
The yuan weakened to a 1-1/2-month low against the dollar as Powell's comments rippled through Asia. China's central bank kept its main policy rates on hold on Thursday, opting not to follow its U.S. counterpart's decision overnight.
Onshore yuan opened at 6.9150 per dollar, the weakest level since June 18. Although the yuan recovered some of the earlier losses, it remained hovering at its softest level since mid-June.
Sterling skidded against the dollar to the lowest in more than two years on the growing risk of a no-deal Brexit, but the focus will shift to a Bank of England meeting later on Thursday.
Economists polled by Reuters are almost certain that the BoE's Monetary Policy Committee will vote 9-0 to keep rates on hold at 0.75%. But it is less clear how Governor Mark Carney will tackle the challenge posed by the prospect of Britain leaving the European Union without provisional trading agreements.
"By no means do we think the weakness for sterling is over, in the sense that the market needs to price in more risk of a no-deal Brexit," said Ray Attrill, head of FX strategy at National Australia Bank in Sydney.
"If the dollar remains supreme in G10 currencies, then this is trouble for sterling."
Sterling was down 0.3% at $1.2125, after earlier hitting $1.2101, the lowest since January 2017.
In the past three months, sterling has tumbled 7.1% due to growing speculation Britain will go through with a no-deal Brexit.
Sentiment for sterling took a turn for the worse after new British Prime Minister Boris Johnson packed his cabinet with Brexit supporters last month. (Reporting by Stanley White Editing by Simon Cameron-Moore)
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