Dollar slumps against euro, jumps against peso on potential Trump win

In commodity markets, spot gold XAU= was firm at $1,304.10 an ounce, having hit its highest since October 4.

Markets were beginning to rethink their long-held bets of a victory for Democratic candidate Hillary Clinton amid signs her Republican rival Donald Trump could be closing the gap, forcing money out of riskier assets and into safe havens such as the Swiss franc and gold.

Investors generally view Clinton as a known quantity, but there is deep uncertainty about what a Trump win might mean for US economic policy, free trade and geopolitics.

The day's single biggest move among the majors, however, was the New Zealand dollar NZD=D4, up 1.3 percent after strong domestic jobs data that quashed expectations for further cuts in interest rates. The dollar plunged about 0.6 percent against the Swiss franc to 0.9695 franc, its lowest in roughly a month.

Brazilian stocks ended the day lower, despite a largely positive batch of corporate results, on concerns surrounding the USA election. "Markets are trying to factor in the changing atmosphere", said Hirokazu Kabeya, chief global strategist at Daiwa Securities.

The tumultuous presidential race appeared to tighten after news that the Federal Bureau of Investigation was reviewing more emails as part of a probe into Clinton's use of a private email server. But a Reuters/Ipsos daily tracking poll released on the same day showed Clinton ahead by 6 percentage points among likely voters.

That pushed US S&P 500 Index down to a four-month closing low on Tuesday. The CBOE volatility index, often seen as investors' fear gauge, briefly rose to a two-month high above 20 percent.

While some argue that a Trump presidency might lead to the substantial repatriation of funds to the United States - and hence into dollars - the running assumption of markets in the past month has been that the currency would fall if he won.

The euro was last up 0.3 per cent at US$1.1088 (RM4.64) after rising 0.6 percent in afternoon trading to US$1.1123, its highest level since October 11. It last stood at $1.1065.

"Markets are now attempting to strike the right balance between the greater probability of a Clinton win and the possibility of a significant selloff on a Trump victory", Ric Spooner, chief market analyst in Sydney at CMC Markets, said.

"And people were buying back the euro because that is the currency that had been being shorted the most against the dollar", he added.

That largely seems the product of the potential for investors to take risk off the table, as they were on Wednesday, as well as the prospect that any blip on markets globally might cause the Federal Reserve to put an interest rate rise on hold.

Traders were pricing in a 72 percent likelihood that the Fed will raise rates in December, according to the CME Group's FedWatch Tool. It has gained nearly 3 percent in the past week against the dollar as improving polls for Trump prompted investors to trim bets on a rise in US interest rates in December.

The October jobs report showed that the USA economy added 161,000 jobs in October, fewer than expected. Brent added 59 cents to $47.45.

  • Zachary Reyes