- Graphic: World FX rates in 2020 https://tmsnrt.rs/2RBWI5E
(Adds details, updates prices; previous LONDON)
The U.S. dollar hit one-month highs against a basket of peers on Monday and expected volatility in major currencies rose to their highest levels since April on investor jitters over the outcome of Tuesday’s U.S. presidential election.
The dollar has strengthened in the past week as risk sentiment soured, with investors reducing positions due to uncertainty over the result.
“The move we saw last week was a pretty broad derisking and I think that makes a lot of sense, people are naturally skeptical about any sort of prognostication with regards to the election after what happened four years ago,” said Erik Nelson, a macro strategist at Wells Fargo in New York.
“The closer the election is the more likely it is to be delayed or contested and that’s the perfect storm for risk assets to go down,” Nelson added.
Democratic challenger Joe Biden leads in national opinion polls, but the race looks close enough in battleground states that President Donald Trump could win the 270 Electoral College votes needed to win.
Investors are also hesitant to trust polls after the majority failed to predict Trump’s victory in 2016.
The dollar index against a basket of currencies =USD was last up 0.03% at 94.13 after earlier reaching 94.29, the highest since Sept. 29. The euro EUR= dipped 0.11% to $1.1634 and the greenback climbed 0.09% against the yen JPY= to 104.73 yen.
Expected swings in the major currencies climbed to their highest since April as investors hedged their exposures before Tuesday’s vote.
"Volatility is rising because liquidity for hedges around the election is very thin. Everyone's the same way, there's no one selling this stuff thinking everything's great," said Jordan Rochester, forex analyst at Nomura. Generally, traders are hedging for decline by the euro and a rise by the dollar.
One-week implied volatility gauges for the euro EUR1WO=R and the yen JPY1WO=R were both above 11%, their highest since the beginning of April.
A surge in global coronavirus cases also weighed on sentiment, In Europe, new COVID-19 cases have doubled in five weeks, a Reuters tally showed, with total infections surpassing 10 million.
The British pound also inched lower after Prime Minister Boris Johnson announced over the weekend a one-month lockdown across England.
Sterling fell to its weakest in two-and-a-half weeks at $1.2852 GBP= . It was last trading at $1.2908, down 0.26% on the day.
The Federal Reserve will conclude its two-day meeting on Wednesday. U.S. jobs data for October is also in focus on Friday.
======================================================== Currency bid prices at 9:41AM (1441 GMT)Description RIC Last U.S. Close Pct Change YTD Pct High Bid Low Bid Previous Change Session Euro/Dollar EUR= $1.1634 $1.1647 -0.11% +3.76% +1.1656 +1.1623 Dollar/Yen JPY= 104.7300 104.6400 +0.09% -3.79% +104.9400 +104.5600 Euro/Yen EURJPY= 121.84 121.88 -0.03% -0.09% +122.1500 +121.7100 Dollar/Swiss CHF= 0.9190 0.9167 +0.25% -5.04% +0.9197 +0.9152 Sterling/Dollar GBP= 1.2908 1.2941 -0.26% -2.65% +1.2952 +1.2855 Dollar/Canadian CAD= 1.3275 1.3317 -0.32% +2.23% +1.3370 +1.3257 Australian/Doll AUD= 0.7044 0.7026 +0.26% +0.33% +0.7051 +0.6992 arEuro/Swiss EURCHF= 1.0691 1.0678 +0.12% -1.48% +1.0699 +1.0672 Euro/Sterling EURGBP= 0.9011 0.8994 +0.19% +6.59% +0.9049 +0.8996 NZ NZD= 0.6625 0.6616 +0.14% -1.65% +0.6634 +0.6590 Dollar/DollarDollar/Norway NOK= 9.5555 9.5347 +0.22% +8.85% +9.6011 +9.5229 Euro/Norway EURNOK= 11.1171 11.1100 +0.06% +13.00% +11.1708 +11.0904 Dollar/Sweden SEK= 8.9183 8.8823 -0.03% -4.59% +8.9407 +8.8799 Euro/Sweden EURSEK= 10.3750 10.3783 -0.03% -0.90% +10.3860 +10.3400
