* Germany, France announces restrictions as COVID cases rise
* Implied volatility rises in yen, euro
* Yen rises to 1-month high vs dollar
* Graphic: World FX rates in 2020 https://tmsnrt.rs/2RBWI5E
(Adds new comment, details on euro risk reversals, updates prices)
By Gertrude Chavez-Dreyfuss
NEW YORK, Oct 28 (Reuters) - The safe-haven dollar rose on Wednesday, pushing the euro to one-week
lows, on news of lockdowns in Germany and France as coronavirus cases surged, with implied volatility
gauges in the European currency and the yen hitting multi-month highs as traders positioned for next
Tuesday's U.S. election.
Germany decided to shut bars and restaurants for a month and France prepared to tighten controls on
movement as the pandemic surged across Europe and financial markets tumbled at the likely cost of a second
lockdown. The European Commission proposed a series of new measures to fight the pandemic in the European Union,
calling the new spike in infections "alarming". "When things get scary everybody rushes to the dollar," said John Payne, senior futures and options
broker, at Daniels Trading, in Chicago.
"The currency markets right now are dealing with problems in Europe, and Europe – I don't know if the
market thinks they have a lot of bullets left to fire at this thing. From a quantitative easing
standpoint, that's what is going to come. You see the dollar being more attractive because maybe Trump
won't go in that direction."
Traders were bracing for volatility as the U.S. election loomed.
Democratic presidential candidate Joe Biden leads Republican President Donald Trump nationally by 10
percentage points, a Reuters/Ipsos poll showed. "We are seeing some position-trimming ahead of the election, with the market still short dollars,"
said Vassili Serebriakov, FX strategist at UBS in New York.
"The expectation is for a Biden presidency and that is consistent with a weaker dollar story. But as
some of the polls have tightened the last couple of days, markets are just taking some risk off the table
given the uncertainty," he added.
The UBS strategist said a Biden administration is seen de-escalating trade tensions with traditional
allies such as Europe and Canada, as well as China, which should improve market sentiment overall and
weigh on the dollar as a safe haven.
In afternoon trading, the euro EUR=EBS was down 0.4% against the dollar at $1.1754, after sliding to
a one-week low.
One-month euro/dollar risk reversals EUR1MRR=FN , a gauge of currency sentiment in the options market
that measures the ratio of calls over puts, showed on Wednesday that investors were most bearish on the
European common currency since June.
The dollar though slipped 0.1% against the yen to 104.31 yen JPY=EBS . Earlier, the greenback dropped
to a more than one-month low.
The euro also fell 0.5% against yen to 122.60 yen EURJPY= , after earlier sinking to its weakest
since July.
One-week implied volatility gauges in euro and yen rose to their highest in nearly seven months.
EUR1WO=R JPY1WO=R
That suggests investors are preparing for sharp price moves, focused on both the European lockdowns
and the United States as it struggles to contain its coronavirus epidemic ahead of the pivotal election
next Tuesday.
Legal battles between Republicans and Democrats over how to count votes have raised the risk that the
outcome of the election will be disputed. The dollar index =USD , which tracks the greenback against a basket of six currencies, was up 0.3% at
93.39.
Elsewhere, sterling fell 0.5% versus the dollar to $1.2958 GBP=D3 .
========================================================
Currency bid prices at 2:54PM (1854 GMT)
Description RIC Last U.S. Close Pct Change YTD Pct High Bid Low Bid
Previous Change
Session
Euro/Dollar EUR=EBS $1.1753 $1.1796 -0.36% +4.84% +1.1799 +1.1718
Dollar/Yen JPY=D3 104.3000 104.4350 -0.11% -3.95% +104.5500 +104.1700
Euro/Yen EURJPY= 122.58 123.14 -0.45% +0.52% +123.1800 +122.1900
Dollar/Swiss CHF=EBS 0.9099 0.9088 +0.10% -5.98% +0.9127 +0.9086
Sterling/Dollar GBP=D3 1.2990 1.3047 -0.42% -2.04% +1.3063 +1.2918
Dollar/Canadian CAD=D3 1.3301 1.3187 +0.83% +2.36% +1.3333 +1.3180
Aussie/Dollar AUD=D3 0.7056 0.7129 -0.97% +0.62% +0.7157 +0.7038
Euro/Swiss EURCHF= 1.0694 1.0716 -0.21% -1.46% +1.0719 +1.0677
Euro/Sterling EURGBP= 0.9045 0.9041 +0.04% +6.99% +0.9076 +0.9015
NZ NZD=D3 0.6653 0.6708 -0.79% -1.10% +0.6719 +0.6630
Dollar/Dollar
Dollar/Norway NOK=D3 9.3495 9.1920 +1.73% +6.60% +9.3825 +9.2100
Euro/Norway EURNOK= 10.9934 10.8310 +1.50% +11.75% +11.0050 +10.8002
Dollar/Sweden SEK= 8.8470 8.7226 +1.06% -5.37% +8.8622 +8.7200
Euro/Sweden EURSEK= 10.3981 10.2887 +1.06% -0.68% +10.4045 +10.2700