September 27, 2016 / 12:33 AM / 2 years ago

FOREX-Dollar soggy, yen buoyant before Clinton-Trump debate

* Dollar/yen dips to 1-month low

* Focus on how equities react to US presidential debate

* Canadian dollar hits 6-mth low vs dollar as debate looms

By Shinichi Saoshiro

TOKYO, Sept 27 (Reuters) - The dollar was on the back foot and the safe-haven yen was buoyant as caution gripped the market ahead of the closely-watched U.S. presidential debate.

Democrat Hillary Clinton and Republican Donald Trump will square off at 0100 GMT.

“The first presidential debate will not necessarily decide the entire outcome, but it could potentially bring instability to the equity markets by increasing uncertainty over who could win the election,” said Junichi Ishikawa, senior FX strategist at IG Securities in Tokyo.

“That would increase risk aversion, already higher on European banking concerns, and deal an additional blow to the dollar. We could see dollar test support at 100 yen.”

While both Clinton and Trump are seen favouring a weaker dollar, some fear a Trump victory could expose the U.S. economy to more acute negative shocks with worse consequences for the U.S. dollar.

The euro was steady at $1.1249 after posting its fourth day of gains on Monday.

The dollar was steady at 100.350 yen after touching a one-month low of 100.085.

The yen gained last week after the Federal Reserve held off from hiking interest rates and as the effectiveness of the Bank of Japan’s monetary easing measures were questioned following its latest policy decision.

BOJ Governor Haruhiko Kuroda said on Monday the central bank stood ready to use every possible policy tool to achieve its 2-percent inflation target, but that did little to push back the yen.

The Canadian dollar was unable to take advantage of a significant rebound in crude oil prices because of debate nerves and weakened against its U.S. counterpart, hitting a six-month low of $1.3265.

The New Zealand dollar managed to pull away from a one-month low of $0.7221 seen on Monday in reaction to data showing a jump in the country’s trade deficit. The kiwi was firm at $0.7276 . (Reporting by Shinichi Saoshiro; Editing by Eric Meijer)

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