* Small overnight rebound in risk currencies stalls
* Dollar, yen steady as traders brace for election
volatility
* RBA expected to cut rates and announce QE at 0330 GMT
* Graphic: World FX rates in 2020 https://tmsnrt.rs/2RBWI5E
By Tom Westbrook
SINGAPORE, Nov 3 (Reuters) - The U.S. dollar hovered near a
one-month high on Tuesday as investors opted for caution in the
hours ahead of polls opening on election day in the United
States.
Traders are on edge over the result and rather than betting
outright on a particular outcome, many have lately flocked to
the safety of dollars so that they are well positioned to take
advantage of volatility when results arrive.
Against a basket of currencies =USD , the dollar held at
94.050, just below a month-high hit on Monday. The safe-harbour
yen JPY= has also ground higher in recent weeks and it was
steady at 104.75 yen per dollar early in Asia trade.
The risk-sensitive Australian dollar AUD=D3 was steady at
$0.7054 ahead of a crucial central bank policy meeting where
markets expect a rate cut and a shift to quantitative easing.
"We have pared back a lot of our positions," said Stuart
Oakley, a London-based executive at Nomura.
"It's a bit reckless to position ourselves for one outcome
of the election... We've positioned ourselves to trade the post
(election) volatility."
Opinion polls have consistently showed Democrat challenger
Joe Biden leading President Donald Trump. Analysts said a Biden
win could weaken the dollar as he intends to spend big on
stimulus, while a steadier foreign policy could lift
trade-exposed currencies.
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, moves on Tuesday were slight.
The New Zealand dollar NZD=D3 , which like the Aussie
recovered from a Monday low along with a bounceback in equities,
was steady at $0.6630. The euro EUR= sat just above a
one-month trough at $1.1639 and sterling was below $1.30.
Beneath the steady spot prices, volatility gauges are
soaring in an indication that things could get bumpy as election
results arrive through the Asia 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. One-week implied volatility for the yuan was over 12%
and a fraction below Monday's five-year peak.
"The risk of a period of heightened currency volatility
appears to be more certain," said Commonwealth Bank of Australia
currency analyst Kim Mundy in a note to clients.
"We see a risk early results and exit polls give opposing
signals on election day, boosting currency volatility during
tomorrow's Asia session."
Besides results, which are not due until the middle of
Asia's trading day on Wednesday at the soonest, investors are
closely watching the Reserve Bank of Australia's (RBA) policy
decision at 0330 GMT.
The RBA has flagged policy easing and economists polled by
Reuters expect that to take the form of a 15 basis point rate
cut to a record low 0.1% and a government bond-buying programme.
"NAB's assessment is that the RBA will need to convince the
market they are prepared to buy at least A$150 billion worth of
bonds to justify the yield declines already seen over the course
of October," said NAB head of foreign exchange strategy Ray
Attrill.
"Otherwise the market, be it bond yields or AUD, risks a
'buy the fact' response, having sold the rumour during October."