FOREX-Dollar on defensive as markets on edge ahead of U.S. election outcome

* Graphic: World FX rates in 2020 https://tmsnrt.rs/2RBWI5E

By Hideyuki Sano
TOKYO, Nov 4 (Reuters) - The U.S. dollar was on the
defensive and risk-sensitive currencies held firm early on
Wednesday as markets remained jittery amid uncertainty over the
outcome of the U.S. presidential election.
U.S. President Donald Trump was projected to win Indiana's
electoral votes, Edison Research said on Tuesday, the first
state to be decided in the race against his Democratic rival Joe
Biden. The contest was still too close to call in several states
and markets were on edge ahead of the final outcome, which may
not be known for days. Some investors bet on a Biden victory,
boosting riskier assets.
A win for Biden, expected to be less confrontational in
trade issues with China and other trade partners than Trump,
will be a boon for currencies that have suffered from tariffs
imposed by the president.
Biden is also expected to spend big on stimulus to support
the pandemic-stricken economy, another positive factor for
riskier currencies, though analysts caution that partly hinges
on the outcome of the Congressional election.
If Democrats win the Senate on top of the House of
Representatives -- a so-called blue wave scenario -- a large
spending is seen as likely while a Republican-controlled Senate
is expected to block a part of Biden's agenda.
Currently Democrats are expected to narrowly win the Senate.
"It seems like many people are betting on a victory by
Biden. It is a complete risk-on trade," said Yukio Ishizuki,
senior currency strategist at Daiwa Securities.
The euro fetched $1.1759 EUR= , having climbed 0.2% in
early trade to extend its gain so far this week to 0.9%.
The British pound stood at $1.3078 GBP= , after rising
0.3% early on Wednesday. It changed hands at 89.68 pence per
euro EURGBP=D4 , its strongest level in almost two months.
The Australian dollar stuck around a three-week high, last
trading at $0.71825 AUD=D4 , even after the nation's central
bank stepped up its monetary easing the previous day.
The offshore Chinese yuan rose 0.4% to 6.6539 per dollar
CNH=D4 while the safe-haven yen moved little at 104.625 per
dollar JPY= .
The dollar index measuring the greenback against a basket of
currencies =USD stood at 93.19, having shed 0.9% on Tuesday,
its biggest daily drop since late March.
The vote results will start to trickle in after 7 p.m. EST
(0000 GMT) but counting could go on for several days and the
final outcome may not be known for some time if the race is too
tight. A third of U.S. voters listed the economy as the issue that
mattered most to them when deciding their choice for president
while two out of 10 cited COVID-19, according to an Edison
Research exit poll on Tuesday. The closer the vote is to call, the higher the risk the
election will be contested, analysts also said.
"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.