FOREX-US dollar slightly lower against yen, euro, after producer price data

By Gertrude Chavez-Dreyfuss

NEW YORK, Sept 10 (Reuters) - The U.S. dollar was marginally down against the yen and euro on Wednesday after data showed producer prices unexpectedly fell in August, cementing expectations that the Federal Reserve will resume cutting interest rates later this month.

The dollar was slightly down against the yen at 147.37 JPY=EBS following the data, while the euro turned marginally higher at $1.1714 EUR=EBS. Before the data, the U.S. currency was trading moderately up on the day against both currencies.

A Labor Department report showed the Producer Price Index for final demand fell 0.1% on a monthly basis, after a downwardly revised 0.7% jump in July. Economists polled by Reuters had forecast the PPI would rise 0.3% after a previously reported 0.9% surge in July.

But the PPI advanced 2.6% on an annual basis in August, compared with a 3.3% gain expected by economists polled by Reuters.

"The August PPI report paints a much less scary picture of prices of goods 'in the pipeline' than the July report," Carl Weinberg, chief economist at High Frequency Economics wrote in emailed comments after the data.

"Core goods prices did rise, but by a lot less than expected. The entire report shows a lower rate of increase in the prices of goods at the factory gate for August than for July."

Following the data, fed funds futures are pricing in a 90% chance of a standard 25-basis-point cut this month and a 10% chance of 50-bp rate decline, according to the CME's FedWatch. That was at 93% and 7%, respectively, late on Tuesday.