Yen hits 5-week high as focus turns to US presidential debate, inflation By Reuters

By Kevin Buckland

TOKYO (Reuters) – The yen neared a five-week high and the dollar hovered near a three-week peak against the euro on Wednesday as traders nervously awaited a key inflation report that could provide clues on how aggressively US rates would follow. be cut next week.

Markets were also cautious ahead of the first debate between US presidential candidates Kamala Harris and Donald Trump, as the candidates gear up for the November election.

The dollar was down 0.2% at 142.18 yen as of 0009 GMT, heading back to a recent low of 141.75 yen, a level not previously seen since Aug. 5. crashed overnight.

The euro was little changed at $1.1019 after falling overnight to $1.10155 for the first time since August 19.

Sterling was steady at $1.3080, after falling to $1.3049 in the previous session, the weakest since August 21.

The value – which measures the currency against its three rivals and three other major rivals – was steady at 101.66 after climbing to a one-week high of 101.77 overnight.

The Federal Reserve is expected to ease policy on September 18 for the first time in more than four years, but traders are divided on the size of the cut. Federal funds futures indicate a 69% chance of a standard rate cut of 25 basis points and a 31% chance of 50bps, according to LSEG calculations.

According to a Reuters poll, US core CPI would have risen 2.6% year-on-year in August, down from 2.9% in July.

“Markets want to see evidence that inflation is behaving in a way that would allow the Fed to cut by 50 basis points if necessary,” said Kyle Rodda, senior market analyst at Capital.com.

At the same time, “a significant negative surprise would not be welcomed by the market as it could be interpreted as a sign of an ongoing demand shock,” he added.

Meanwhile, the televised debate between Republican nominee Trump and Democratic Vice President Harris was the immediate focus of investors, who broadly see the dollar strengthening in the event of a Trump victory as tariffs could support the currency and higher fiscal spending could stimulate interest. rates.

The stakes are especially high given that the debate between Trump and President Joe Biden ultimately led the incumbent to drop out of the race.