FOREX-Dollar slips; markets in wait-and-see mode before U.S. debate

* Graphic: World FX rates in 2020 https://tmsnrt.rs/2RBWI5E

(Updates prices, adds comment and chart)
By Elizabeth Howcroft
LONDON, Sept 29 (Reuters) - The dollar index slipped from
recent two-month highs on Tuesday, as markets waited for the
first debate between the U.S. presidential candidates, signs of
progress in U.S. fiscal stimulus talks, and economic data
including German inflation.
After racking up its biggest weekly gains since early April
last week as markets turned cautious and sought safer assets,
the dollar gave up some gains on Monday and edged down further
on Tuesday, ahead of the debate between President Donald Trump
and Democratic challenger Joe Biden. The 90-minute televised debate at 9 p.m. ET (0100 GMT) will
be watched by investors looking for a steer on the candidates'
prospects. ING strategists told clients in a note that a rise in
Trump's perceived chances was likely to boost the dollar,
"although the non-negligible risk of a contested outcome (along
with the ultra-dovish Fed) may keep the dollar's upside somewhat
capped in the run-in to the vote".
Commerzbank FX and EM analyst You-Na Park-Heger said the
question of whether Trump would accept the result if he was
defeated, or instead trigger a period of uncertainty, was in
fact the decisive factor for the dollar.
"The debate is unlikely to provide any new insights in this
respect and we therefore do not expect it to move EUR-USD in a
major way," she wrote.
At 1104 GMT, the dollar was at 94.033 against a basket of
currencies, down around 0.1% on the day =USD .
Craig Erlam, senior market analyst at OANDA, said that the
dollar rebound could continue in the short term, and that
Tuesday's pause could be due to month-end profit-taking, as
investors wait until after the debate to enter new positions.
"I think there is going to be an overall view of ‘step
aside' as far as today is concerned - sit on the fence, let's
just see how this evening unfolds," he said.
European shares were down, but riskier currencies
strengthened, a move that OANDA's Erlam said was driven by the
dollar.
The New Zealand dollar was up 0.5% at 0.6583 NZD=D3 and
the Australian dollar up 0.6% on the day at 0.71135 AUD=D3 -
both recovering from sharp falls last week. The yen was steady against the dollar at 105.615 at 1055 GMT
JPY=EBS .
Markets were also waiting for developments in talks over aid
for people affected by the coronavirus in the United States.
U.S. House of Representatives Speaker Nancy Pelosi said on
Monday that Democratic lawmakers were unveiling a new $2.2
trillion fiscal stimulus bill, which she said was a compromise
and less costly as it covers a shorter period of time.
The pound strengthened, boosted by hopes for a Brexit deal
and the Bank of England's deputy governor saying he thought the
floor for the central bank's key interest rate was 0.1%.
The euro was up 0.2% on the day at $1.1687 EUR=EBS , while
the Swiss franc was steady against the euro at 1.0786
EURCHF=EBS .
European Central Bank policymakers are increasingly divided
over how to steer Europe's economy through a second wave of
COVID-19 infections. More than 1 million people have died globally due to the
coronavirus. German inflation data for September is due at 1200 GMT and
is expected to come in at -0.1%, according to a Reuters poll.
"Barring a negative CPI read in Germany, EUR/USD should test
1.1700 today ahead of the US Presidential debate as improved
sentiment may take some support off the USD," ING wrote.
U.S. consumer confidence data for September is due at 1400
GMT.

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