* Dollar jumps as U.S. presidential race neck-and-neck
* Mexican peso, Chinese yuan hit hardest on trade war
worries
* Trump projected to win Florida, Ohio; Rust Belt in focus
* Implied volatilities ease despite prospect of delay in
poll
outcome
By Hideyuki Sano and Eimi Yamamitsu
TOKYO, Nov 4 (Reuters) - The U.S. dollar jumped and
risk-sensitive currencies weakened on Wednesday, as early
results in the U.S. presidential election showed a very tight
race, prompting a wind-back of bets on a victory by Democratic
challenger Joe Biden.
President Donald Trump was leading in key battleground
states including Florida and Ohio, while investors looked to
whether he can retain Rust Belt states -- Michigan, Wisconsin
and Pennsylvania -- that sent Trump to the White House in
2016.
"This is clearly not a "blue wave" some people have been
talking about," said Shinichiro Kadota, senior currency
strategist at Barclays, referring to a scenario where Democrats
will handily win the White House as well as the control of both
chambers of Congress.
(For multimedia U.S. election coverage, click: https://www.reuters.com/world/us-election2020
)
The rising likelihood of Trump's re-election hurts the
currencies that have been hit hardest by Trump's trade policies,
such as the Mexican peso and the Chinese yuan.
The Mexican peso fell almost 4% at one point and last traded
at 21.435 per dollar MXN=D4 , down about 1.7% while the
offshore Chinese yuan fell 0.4% to 6.7362 to the dollar CNH= ,
hitting a one-month low.
Among major currencies, the euro fell as much as 1% to a low
not seen since late July and last stood at $1.1665 EUR= , down
0.45% on day.
The Australian dollar lost 0.6% to $0.7120 AUD=D4 while
the British pound dropped 0.5% to $1.2983 GBP=D4 . The Canadian
dollar fell 0.7% to C$1.3225 per U.S. unit CAD=D4 . All of them
sank more than one percent at one point.
"I think the odds of a clean sweep are diminishing, almost
by the minute. That reduces the possibility, or the likelihood
at least of a large stimulus programme being agreed to in the
first days of a Biden administration," said Matt Sherwood, head
of investment strategy at Perpetual in Sydney.
The Japanese yen also gave up 0.35% to 104.87 per dollar
JPY= .
The dollar index measuring the greenback against a basket of
currencies .DXY gained 0.3% to 93.82.
Investors were increasingly braced for the possibility that
the election results may not become clear on Wednesday, with
markets hedging against the risk of a contested election or a
potentially drawn out process as mail in ballots were counted.
"I don't think markets at this point are pricing in a
victory of Trump or Biden. We just have to wait for the
results," said Kyosuke Suzuki, director of forex at Societe
Generale in Tokyo.
"A contested election probably takes all of the SPX, bond
yields and the USD (at least versus majors) down meaningfully,"
said Alan Ruskin, chief international strategist at Deutsche
Bank in New York.
Still, implied volatilities on most major currency pairs
have been relatively stable, suggesting investors expect markets
to be able to take a protracted period of vote counting in their
stride.
One-month eudo/dollar volatility EUR1MO= dropped to 7.90%
from 8.29% on Tuesday while the dollar/yen volatility JPY1MO=
dropped to 7.20% from 7.75%.
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Trump and U.S. dollar https://tmsnrt.rs/3kTK3tk
USD, MX peso, Chinese yuan on election night https://tmsnrt.rs/2I4KWkd
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