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FOREX-Caution prevails for dollar heading into U.S. election

    * Dollar broadly steady as election risk mutes market moves
    * Investors brace for volatility after polls close
    * U.S. election results to filter in through Wednesday Asia
trade
    * Graphic: World FX rates in 2020 tmsnrt.rs/2RBWI5E

    By Julien Ponthus
    LONDON, Nov 3 (Reuters) - Caution prevailed on foreign
exchange markets on Tuesday in the hours ahead of polls opening
in the United States as investors braced for possible
post-election disputes that could trigger a burst of volatility
for the dollar. 
    Markets are singularly focused on the election result, but
rather than outright bets on a particular outcome many traders
have flocked to the safety of dollars so that they are well
positioned to take advantage of volatility when results arrive.
    "Those who haven’t hedged yet but who would feel the pain in
case of strong moves should hedge themselves as soon as
possible, as it is getting increasingly expensive", Commerzbank
strategist Antje Praefcke wrote to her clients in a note. 
    "There is only one thing we can do: fasten seatbelts, put
the helmets on and wait what happens in EUR-USD over the coming
days", she said, adding that "even riots in the U.S. cannot be
excluded, which may cause the market to sell the dollar."
    In early morning European trading, the dollar was down 0.2%
against a basket of currencies at 93.831 after hitting a
month-high on Monday.
    The euro rose 0.26% against the dollar to $1.1670 and
sterling ticked up to just below $1.30.
    The safe-harbour yen was also slightly higher, up
0.14% at 104.72 yen per dollar.
    Analysts said a Biden win could weaken the dollar as he is
expected to spend big on stimulus and to take a freer approach
to trade - boosting other currencies at the dollar's expense.
    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, selling was limited.
    "It's a bit reckless to position ourselves for one outcome
of the election... We've positioned ourselves to trade the post
(election) volatility", said Stuart Oakley, a London-based
executive at Nomura.
    Beneath the steady spot prices, volatility gauges are
soaring in an indication that things could get bumpy as election
results arrive through the Asian session on Wednesday.
    One-week implied volatility for the euro and yen
 were both above 11%, the highest since the beginning
of April. 
    President Donald Trump, who is trailing Democratic rival Joe
Biden in national opinion polls, has made attacks on mail-in
ballots and suggested he would deploy lawyers if states are
still counting votes after Election Day on Tuesday.
    It is not unusual in the United States for states to take
several days or even weeks to count their votes, and a record
surge in mail ballots as a result of the coronavirus pandemic
could draw out the process further this year.
     "Under no scenario will Donald Trump be declared a victor
on election night," Biden campaign manager Jennifer O'Malley
Dillon told reporters. 
    The Aussie ticked 0.1% higher after an initial dip
after the Reserve Bank of Australia lowered its policy interest
rate by 15 basis points to 0.1% and announced a bond-buying
programme, as widely expected.

    ========================================================
    Currency bid prices at 8:01AM (801 GMT)
 Description      RIC         Last           U.S. Close  Pct Change     YTD Pct     High Bid    Low Bid
                                              Previous                   Change                 
                                              Session                                           
 Euro/Dollar                  $1.1668        $1.1638     +0.27%         +4.09%      +1.1673     +1.1625
 Dollar/Yen                   104.5700       104.8100    -0.22%         -3.73%      +104.8100   +104.4850
 Euro/Yen                     122.00         121.93      +0.06%         +0.04%      +122.1300   +121.8300
 Dollar/Swiss                 0.9179         0.9194      -0.16%         -5.14%      +0.9191     +0.9177
 Sterling/Dollar              1.2938         1.2917      +0.19%         -2.42%      +1.2946     +1.2911
 Dollar/Canadian              1.3217         1.3229      +0.01%         +1.75%      +1.3234     +1.3208
 Aussie/Dollar                0.7066         0.7057      +0.17%         +0.76%      +0.7071     +0.7028
 NZ                           0.6646         0.6634      +0.23%         -1.17%      +0.6654     +0.6622
 Dollar/Dollar All spots
Tokyo spots
Europe spots 
Volatilities 
Tokyo Forex market info from BOJ

    
 (Reporting by Julien Ponthus and Tom Westbrook; Editing by
Christopher Cushing and Emelia Sithole-Matarise)
  
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