Dollar on the back foot as U.S. election jitters jangle nerves

By Shinichi Saoshiro

TOKYO (Reuters) - The dollar was on the back foot against the euro and yen on Wednesday as the possibility the U.S. presidential election could be too close to call jangled investor nerves.

The greenback slumped to a three-week low against the euro and lost ground versus the yen overnight, as some polls showed Republican Donald Trump ahead after the FBI said it was probing newly-found emails related to Democrat Hillary Clinton's use of a private server.

The euro was steady at $1.1057 after rising about 0.7 percent to $1.1069 the previous day, its highest since Oct. 11.

The dollar was little changed at 104.075 yen after shedding 0.6 percent overnight. It has skidded from a three-month peak of 105.540 reached last week.

With less than a week to go until the U.S. elections, politics have overshadowed fundamentals, with a Federal Reserve policy decision due late on Wednesday possibly relegated to a sideshow.

The Fed is expected to keep interest rates unchanged but set the stage for a hike in December amid signs the economy is picking up steam.

"The currency market is unlikely to treat the Fed meeting as a strong factor," said Shin Kadota, chief Japan FX strategist at Barclays (LON:BARC) in Tokyo. "The Fed has been hinting of a December rate hike for a while, and the market is focused on events related to the U.S. elections."

"While Clinton may still hold a lead over Trump, the dollar could suffer another round of declines if new polls show Trump catching up."

Clinton held a 5 percentage-point lead over Trump, according to a Reuters/Ipsos opinion poll released on Monday, little changed since the FBI announcement.

But dashing presumptions of an easy Clinton win, a poll by ABC News showed Trump leading by 1 point and the Los Angeles Times put the Republican more than 2 points ahead.

The Mexican peso, considered a rough barometer of the ebb and flow of Trump's fortunes in the presidential race, struggled near a three-week low against the greenback.

The Mexican currency stood at 19.17 pesos per dollar after slipping to 19.27 overnight, its lowest since Oct. 7.

A potential Trump victory has been viewed as a key risk for the Mexican currency, given the candidate's promises to clamp down on immigration and rethink trade relations.

The Australian dollar was virtually flat at $0.7647 after gaining 0.5 percent the previous day after the country's central bank left rates steady and refrained from including an explicit easing bias in its statement, as some had speculated.