* Graphic: World FX rates in 2020 https://tmsnrt.rs/2RBWI5E
(Updates throughout)
By Elizabeth Howcroft
LONDON, Nov 4 (Reuters) - The dollar gave up most of its
gains and riskier currencies recovered on Wednesday as investors
waited for U.S. election results amid growing hopes that the
worst of the volatility related to the event has passed.
President Donald Trump won in the key battleground states of
Florida, Ohio and Texas but the contest will not be decided
until a handful of states finish vote counts in the next hours
or days.
The dollar =USD rose as much as 1.2% overnight to hit more
than one-month highs versus its rivals as early results
indicated a tight race, surprising many who had bet on a
decisive win for Democrat Joe Biden. Riskier currencies such as
the yuan CNH=D3 and Australian dollar AUD=D3 fell more than
1% each.
But during the European session, the greenback lost some
ground, and riskier currencies recovered, with the yuan hitting
a 13-day high, as investors unwound some of those extreme
positions.
"We have not so far seen big risk-off moves so I would think
that probably that's the template for how things will evolve
here," said Jonathan Davies, head of currency strategy at UBS.
"So even if we're getting more indications that it's going
to be drawn out, the experience so far is not suggesting that
we're going to see huge FX volatility and huge dollar strength,"
he added.
John Goldie, an FX dealer at Argentex, said that the
uncertainty about the result left markets in wait-and-see mode.
"Talking to clients, we had some expectations of some bigger
moves in either direction," he said.
At 1239 GMT, the dollar was up around 0.2% on the day versus
a basket of currencies =USD , while euro-dollar had flipped to
positive on the day, up 0.1% at $1.17385 EUR=EBS .
Andreas Koenig, Amundi's head of global FX said that he had
not changed his portfolio positions yet but would look to
increase risk exposure once there was a clear outcome. He
favours China's offshore yuan, the Canadian dollar and high-beta
currencies such as the Mexican peso and Russia's rouble.
A Biden victory had been expected to boost prospects for a
large U.S. fiscal aid package and lessen trade war tensions,
causing the dollar to weaken sharply. It fell to a one-week low
on Tuesday on expectations of a Biden win. An uncertain election result heightens the risk of a
contested outcome, which could include lengthy legal battles,
prompting investors to seek safer assets.
But overnight volatility gauges for euro-dollar and
dollar-yen fell. They had surged to their highest levels since
March earlier this week EURONO= JPYONO= .
Market participants said that this was due to a lack of
information, with investors not initiating new trades at this
stage.
(For multimedia U.S. election coverage, click here https://www.reuters.com/world/us-election2020.)
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Dollar climbs as election result looms https://tmsnrt.rs/3jT5Gc1
USDCNH https://tmsnrt.rs/2GpyY4j
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