* Graphic: World FX rates in 2020 https://tmsnrt.rs/2RBWI5E
(Updates throughout)
By Elizabeth Howcroft
LONDON, Nov 4 (Reuters) - The dollar gave up some gains and
riskier currencies remained on the backfoot as markets waited
for the U.S. election outcome after early results indicated a
tight race, surprising investors who had bet on a decisive win
for Democrat Joe Biden.
President Donald Trump won in the key battleground states of
Florida, Ohio and Texas, dashing market hopes for a clear
result. Investors waited to see whether Trump would retain the
Rust Belt states -- Michigan, Wisconsin and Pennsylvania -- that
sent him to the White House in 2016.
The dollar =USD rose as much as 1.2% overnight to hit more
than one-month highs versus its rivals and riskier currencies
such as the yuan CNH=D3 and Australian dollar AUD=D3 fell
more than 1% each.
But the dollar gave back some of its gains to trade up 0.7%
as the race tightened.
"The expected ‘blue sweep' that the market was anticipating
has not materialised," said Neil Jones, head of FX sales for
financial institutions at Mizuho.
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.
But an uncertain election result heightens the risk of a
contested outcome, which could include lengthy legal battles,
prompting investors to seek safer assets.
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.
The rising likelihood of a Trump re-election hurt currencies
that have been hardest hit by his trade policies, such as the
Mexican peso and the yuan, which were down 2.2% and 0.7% on the
day, respectively MXN= CNH=EBS .
The Australian dollar also took a hit, down 1.2% at 0.7077
AUD=D3 . Sterling fell around 1% GBP=D3 .
The euro was down 0.4% at $1.1671 after having earlier
tumbled to its lowest in more than three months EUR=EBS .
(For multimedia U.S. election coverage, click here https://www.reuters.com/world/us-election2020.)
"We saw the dollar come under pressure going into the
election and we are now seeing an unwind of that," said Salman
Ahmed, head of macro and strategic allocation at Fidelity
International.
Overnight volatility gauges for euro-dollar and dollar-yen
fell however. 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.
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USDCNH https://tmsnrt.rs/2GpyY4j
Dollar climbs as election result looms https://tmsnrt.rs/3jT5Gc1
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