Dollar Plummets as Investors Eye Kamala Harris' Potential Victory and Anticipate U.S. Inflation Report

The dollar hit its lowest against the yen this year after investors raised the odds of Kamala Harris defeating Donald Trump in the upcoming presidential election. A key U.S. inflation report is also on the horizon, which could influence the Federal Reserve's decisions on interest rate cuts. The dollar faced broad pressure, especially from the yen, amid cautious market sentiment.

The dollar experienced a significant drop against the yen on Wednesday as investors increased the likelihood of Kamala Harris winning against Donald Trump in the upcoming presidential election.

Traders are also eagerly awaiting the upcoming U.S. inflation report, which is expected to provide insights on how the Federal Reserve might adjust interest rates next week. The dollar came under widespread pressure but fell most notably against the yen, further impacted by statements from Bank of Japan's board member Junko Nakagawa about maintaining rate hikes if economic conditions allow.

Sentiment on Wednesday was marked by caution, driving flows into safe-haven assets like the yen, Swiss franc, and gold. Following a tense debate where Harris challenged Trump on various issues, her chances of winning showed a boost, partially influenced by public endorsements from figures like Taylor Swift. Markets remain focused on Wednesday's CPI report, which may indicate how the Fed could proceed with rate cuts.

(With inputs from agencies.)