FOREX-Dollar dips to price Biden win on U.S. election day

    * Dollar loses ground, euro rises 
    * Investors brace for volatility after polls close
    * Analyst warns of election risks
    * U.S. election results to filter in through Wednesday Asia
    * Graphic: World FX rates in 2020

    By Julien Ponthus
    LONDON, Nov 3 (Reuters) - Foreign exchange markets moved on
Tuesday towards pricing a victory for U.S. Democratic candidate
Joe Biden against President Donald Trump despite warnings that
possible post-election disputes could unleash weeks of dollar
    The dollar was down 0.44% against a basket of currencies
 at 93.618 after hitting a month high on Monday.
    Analysts believe a Biden win would weaken the dollar as the
former vice president is expected to spend big on stimulus and
to take a freer approach to trade, boosting other currencies at
the dollar's expense.
    They cautioned, however, that uncertainty was very high
about the election outcome and that taking positions might prove
    "I'm more nervous than European markets are today," said
Berenberg chief economist Holger Schmieding, warning some
investors may be jumping the gun on the issue, particularly if
no clear winner emerges swiftly from the polls. 
    The euro extended gains and rose 0.58% against the
dollar, crossing the $1.17 bar, while sterling also rose
slightly to just below $1.30.
    Meanwhile, European stock markets were making strong gains
while euro zone government yields rose and oil prices extended
their rally, exposing how investors were gradually switching
from a cautious mood and getting ready to bet on a clear victory
for the Democratic candidate. 
    "The markets tempted fate on Tuesday morning, forgetting the
lessons of 2016 as they pre-emptively celebrated a Joe Biden
victory," warned Connor Campbell, an analyst at Spreadex.
    Republican Trump, who is trailing Biden in national opinion
polls, has criticised mail-in ballots and suggested he would
deploy lawyers if states are still counting votes after election
day on Tuesday. 
    Overnight gauges of volatility for major currency pairs
jumped to multi-month highs ahead of the outcome of the
    Euro/dollar implied volatility surged over 19%,
its highest level since the depths of the market mayhem in
March, compared with less than 7% on Monday. Other indicators
like dollar/yen volatility also jumped.
    Investors had taken a more cautious approach as the election
neared. Rather than outright bets on a particular outcome, many
traders had flocked to the safety of dollars so that they were 
well positioned to take advantage of volatility when results
    "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 morning note
prior to the dollar losing ground. 
    "There is only one thing we can do: fasten seatbelts, put
the helmets on and await 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."
    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 due to the COVID-19 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. 
    Among other currencies making gains against the dollar, the
Aussie rose 0.15% after an initial dip which followed
the Reserve Bank of Australia lowering its policy interest rate
by 15 basis points to 0.1% and announcing a bond-buying
    The safe-harbour yen was also slightly higher, up
0.03% at 104.69 per dollar.

    Currency bid prices at 12:42PM (1242 GMT)
 Description      RIC         Last           U.S. Close  Pct Change     YTD Pct     High Bid    Low Bid
                                              Previous                   Change                 
 Euro/Dollar                  $1.1702        $1.1638     +0.55%         +4.38%      +1.1718     +1.1625
 Dollar/Yen                   104.6900       104.6900    +0.03%         -3.59%      +104.7800   +104.7200
 Euro/Yen                     122.50         121.93      +0.47%         +0.45%      +122.7500   +121.8300
 Dollar/Swiss                 0.9149         0.9194      -0.48%         -5.45%      +0.9191     +0.9144
 Sterling/Dollar              1.2993         1.2993      +0.02%         -2.01%      +1.3004     +1.2974
 Dollar/Canadian              1.3158         1.3159      +0.01%         +1.30%      +1.3162     +1.3154
 Aussie/Dollar                0.7129         0.7124      +0.08%         +1.61%      +0.7139     +0.7122
 NZ                           0.6671         0.6668      +0.09%         -0.82%      +0.6677     +0.6667
 Dollar/Dollar All spots
Tokyo spots
Europe spots 
Tokyo Forex market info from BOJ

 (Reporting by Julien Ponthus and Tom Westbrook; Editing by
Emelia Sithole-Matarise, Pravin Char and Susan Fenton)