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September US PCE inflation ticks up, as expected

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Fed seen cutting policy rate by 25 bps in Nov, Dec

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Yen firms after less dovish BOJ

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Euro higher after the bloc's strong Oct inflation data

(Updates to U.S. morning)

By Saqib Iqbal Ahmed

NEW YORK, Oct 31 (Reuters) - The dollar eased broadly on

Thursday after U.S. data suggested upward price pressures

continue to ease, keeping Federal Reserve policymakers on track

to cut short-term U.S. borrowing costs by a quarter percentage

point next week.

Data on Thursday showed U.S. consumer spending increased

slightly more than expected in September, putting the economy on

a higher growth trajectory heading into the final three months

of the year.

Inflation by the Fed's targeted measure, the year-over-year

increase in the personal consumption expenditures index, was

2.1% in September, down from an upwardly revised 2.3% in August,

a Commerce Department report showed. The Fed aims at 2%

inflation.

"(The) U.S. economic releases confirm that the economy

remains on course for a 'soft landing', with the economy

continuing to make disinflationary progress back towards the

FOMC's 2% price target," Michael Brown, senior research

strategist at Pepperstone, said.

The Fed is likely to go ahead with cutting short-term U.S.

borrowing costs by a quarter percentage point next week, traders

bet on Thursday, with futures contracts settling to the Fed's

policy rate putting the chances of a 25 basis point cut next

week at about 94%.

The dollar also came under pressure against the yen

after the Bank of Japan took a less dovish tone than

expected, while the euro was stronger after data

showed the bloc's inflation accelerated more than expected in

October, bolstering the case for caution in European Central

Bank interest rate cuts.

The dollar was down 0.48% against the yen at 152.68 yen and

the euro was 0.3% higher against the buck at $1.088725.

"Some of the move is likely a function of yen demand after a

marginally more hawkish BoJ during the Asia session, as well as

some upside in the euro after hotter-than-expected CPI figures

dented the chances of a 50 basis points December ECB cut,"

Pepperstone's Brown said.

Traders were also likely taking the opportunity to book

profits after the dollar's strong run in recent weeks, Brown

said.

The Dollar Index, which measures the U.S. currency's

strength against a basket of major peers, rose as much as 4.5%

from its September lows.

Attention now turns to Friday's closely watched nonfarm

payrolls report and next week's U.S. presidential election on

Tuesday.

Economists polled by Reuters estimate 113,000 jobs were

added in October, although the number could be lower due to

recent hurricanes.

"A slightly hotter or slightly cooler (jobs) number to me

probably doesn't change the dial too much given the upbeat trend

in recent economic data," said IG Market Analyst Tony Sycamore.

"It makes sense to me to be ... taking some risk off and

moving to the sidelines" ahead of a week that will "set the tone

for the end of the year," he said.

Some investors have been putting on trades betting

Republican candidate Donald Trump will win, helping to lift the

dollar and U.S. Treasury yields, although he is still neck and

neck with Democratic Vice President Kamala Harris in several

polls.

Trump's plans to implement tax cuts, loosen financial

regulations and raise tariffs are seen as inflationary and could

slow the Federal Reserve in its policy easing path.

On Thursday, the BOJ maintained ultra-low interest rates

but said risks around the U.S. economy were somewhat subsiding,

signalling that conditions are falling into place to raise

interest rates again.

Governor Kazuo Ueda's remarks were seen as less dovish than

those made before the meeting that the BOJ could "afford to

spend time" scrutinising the fallout from risks such as U.S.

economic uncertainties.

Elsewhere, sterling fell 0.4% to $1.2905, a day

after Britain's finance minister Rachel Reeves launched the

biggest tax increases since 1993 in her first budget.

In cryptocurrencies, bitcoin, the world's largest

cryptocurrency by market cap, was 2% lower at $71,111, less than

4% shy of its record high from March.