FOREX-Dollar steady as all eyes on U.S. presidential debate

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

By Eimi Yamamitsu
TOKYO, Sept 29 (Reuters) - The dollar held steady against a
basket of currencies on Tuesday as financial markets braced for
the first U.S. presidential debate, while traders also tracked
developments on the U.S. stimulus bill.
The dollar index was unchanged at 94.209 =USD , drifting
away from a two-month high of 94.745 reached last week, as stock
markets made solid gains partly on upbeat China data with Wall
Street rebounding following last week's selloff.
All eyes are on the first U.S. presidential election debate
where Democrat Joe Biden and Republican Donald Trump will square
off later on Tuesday (0100 GMT on Wednesday).
"If the debate puts Trump on the back foot and Biden keeps
his lead, I think it could lead people to let go of their
dollars," said Daisuke Karakama, chief market economist at
Mizuho Bank.
“The dollar market has been broadly bottoming out from low
prices since mid-September. The question is what would be the
trend in October,” Karakama said, adding that market
participants are also keeping a close watch on any stimulus
package plans.
House speaker Nancy Pelosi said on Monday the Democratic
lawmakers were unveiling a new $2.2 trillion coronavirus relief
bill, a compromise measure that reduces the costs of the
economic aid. Markets are also braced for a slew of data to gauge the
health of the world's biggest economy ahead of the election,
analysts say, including Tuesday's consumer confidence, a
manufacturing survey and consumer data on Thursday as well as
jobs report on Friday.
Sterling extended its overnight gains on optimism about a
Brexit trade deal as the European Union and Britain kicked off a
decisive week of talks.
The British pound edged 0.18% higher, fetching $1.2856
GBP=D3 in Asian trade, having touched $1.2930 overnight.
Against the euro, sterling changed hands at 90.77 pence
EURGBP=D3 .
While both the EU and Britain said a post-Brexit agreement
was still some way off, European Commission chief Ursula von der
Leyen said a deal was still possible. Separately, the pound also found support overnight as Bank
of England Deputy Governor Dave Ramsden said he thought the
floor for the central bank's key interest rate was 0.1%. Ramsden
however said the BoE was "duty-bound" to consider pushing the
rates below zero. The euro steadied at $1.1674 EUR= , with its recovery
capped by European Central Bank President Christine Lagarde's
remarks that the external value of the shared currency has an
impact on inflation, and that policymakers will monitor currency
movements. As Europe grapples with a surge in new coronavirus
infections, traders will be looking out for euro zone consumer
confidence and industrial sentiment data for September for signs
of any impact on the region's economic recovery.
Elsewhere, the dollar was little changed against the yen at
105.52 yen JPY= .
"The problem right now is that political risks in both sides
of the world are neutralising the yen momentum," said Stephen
Innes, chief global market strategist at AxiCorp.
"I think ultimately, if we go through the inflation area
impacts, the U.S. real yields dropping more - the markets
gravitate back more frequently into the yen," he said.
Data on Tuesday showed Tokyo's core consumer prices fell
0.2% in September, the latest evidence of the lingering impact
of the coronavirus on business activity. The risk-sensitive Australian dollar gained moderately as
economists pushed back expectations for a rate cut by the
Reserve Bank of Australia to November from next week, with
support also coming from the broad rise in risk appetite.
The Aussie AUD=D3 bounced off its two-month low to last
trade at $0.7084, while the kiwi NZD=D3 sat at $0.6568.