* Dollar broadly steady as election risk mutes market moves
* Investors brace for volatility after polls close
* U.S. election results to filter in through Wednesday Asia
trade
* Graphic: World FX rates in 2020 https://tmsnrt.rs/2RBWI5E
By Julien Ponthus
LONDON, Nov 3 (Reuters) - Caution prevailed on foreign
exchange markets on Tuesday in the hours ahead of polls opening
in the United States as investors braced for possible
post-election disputes that could trigger a burst of volatility
for the dollar.
Markets are singularly focused on the election result, but
rather than outright bets on a particular outcome many traders
have flocked to the safety of dollars so that they are well
positioned to take advantage of volatility when results arrive.
"Those who haven't hedged yet but who would feel the pain in
case of strong moves should hedge themselves as soon as
possible, as it is getting increasingly expensive", Commerzbank
strategist Antje Praefcke wrote to her clients in a note.
"There is only one thing we can do: fasten seatbelts, put
the helmets on and wait what happens in EUR-USD over the coming
days", she said, adding that "even riots in the U.S. cannot be
excluded, which may cause the market to sell the dollar."
In early morning European trading, the dollar was down 0.2%
against a basket of currencies =USD at 93.831 after hitting a
month-high on Monday.
The euro EUR= rose 0.26% against the dollar to $1.1670 and
sterling GBP= ticked up to just below $1.30.
The safe-harbour yen JPY= was also slightly higher, up
0.14% at 104.72 yen per dollar.
Analysts said a Biden win could weaken the dollar as he is
expected to spend big on stimulus and to take a freer approach
to trade - boosting other currencies at the dollar's expense.
But with battleground states too close to call and with the
prospect of either a Trump victory or an inconclusive result
likely to support the dollar, selling was limited.
"It's a bit reckless to position ourselves for one outcome
of the election... We've positioned ourselves to trade the post
(election) volatility", said Stuart Oakley, a London-based
executive at Nomura.
Beneath the steady spot prices, volatility gauges are
soaring in an indication that things could get bumpy as election
results arrive through the Asian session on Wednesday.
One-week implied volatility for the euro EUR1WO=R and yen
JPY1WO=R were both above 11%, the highest since the beginning
of April.
President Donald Trump, who is trailing Democratic rival Joe
Biden in national opinion polls, has made attacks on mail-in
ballots and suggested he would deploy lawyers if states are
still counting votes after Election Day on Tuesday.
It is not unusual in the United States for states to take
several days or even weeks to count their votes, and a record
surge in mail ballots as a result of the coronavirus pandemic
could draw out the process further this year.
"Under no scenario will Donald Trump be declared a victor
on election night," Biden campaign manager Jennifer O'Malley
Dillon told reporters.
The Aussie AUD=D3 ticked 0.1% higher after an initial dip
after the Reserve Bank of Australia lowered its policy interest
rate by 15 basis points to 0.1% and announced a bond-buying
programme, as widely expected. ========================================================
Currency bid prices at 8:01AM (801 GMT)
Description RIC Last U.S. Close Pct Change YTD Pct High Bid Low Bid
Previous Change
Session
Euro/Dollar EUR=EBS $1.1668 $1.1638 +0.27% +4.09% +1.1673 +1.1625
Dollar/Yen JPY=D3 104.5700 104.8100 -0.22% -3.73% +104.8100 +104.4850
Euro/Yen EURJPY= 122.00 121.93 +0.06% +0.04% +122.1300 +121.8300
Dollar/Swiss CHF=EBS 0.9179 0.9194 -0.16% -5.14% +0.9191 +0.9177
Sterling/Dollar GBP=D3 1.2938 1.2917 +0.19% -2.42% +1.2946 +1.2911
Dollar/Canadian CAD=D3 1.3217 1.3229 +0.01% +1.75% +1.3234 +1.3208
Aussie/Dollar AUD=D3 0.7066 0.7057 +0.17% +0.76% +0.7071 +0.7028
NZ NZD=D3 0.6646 0.6634 +0.23% -1.17% +0.6654 +0.6622
Dollar/Dollar
All spots FX=
Tokyo spots AFX=
Europe spots EFX=
Volatilities FXVOL=
Tokyo Forex market info from BOJ TKYFX
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Reuters Poll: U.S. dollar outlook https://tmsnrt.rs/2TPhKjO
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