The dollar weakens as US data underscores cooling of the US economy. The yen surged as Japan's ruling party picked its next leader while the euro fell following inflation data out of France and Spain.

The Bloomberg Dollar Spot Index fell 0.2%

The Fed's preferred measure of underlying US inflation and household spending rose modestly in August, underscoring a cooling economy

"Key for a second jumbo cut would be the labor market data next week," said Valentin Marinov, Credit Agricole's head of G10 FX research and strategy. "The view still is that a lot of Fed-related negatives are already in the price of the USD"

"With other CBs (with the notable exception of the BOJ) expected to soon follow suit and ease their policy, the USD could recoup some losses vs the likes of the EUR," he said

USD/JPY fell 1.5% to 142.67

EUR/USD drops 0.2% to 1.1160; inflation in France and Spain plunged below 2%, fueling bets that the European Central Bank will speed up the pace of interest-rate cuts

Inflation expectations of consumers in the euro area decreased in August, according to the ECB

USD/CHF fell 0.4% at 0.8426

GBP/USD down 0.2% to 1.3395

Source : Bloomberg