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

NEW YORK (Reuters) - The U.S. dollar hit its lowest level in more than three weeks against the euro, yen, Swiss franc and sterling on Wednesday on nervousness about a potential victory for U.S. Republican presidential candidate Donald Trump next week.

Euro, Hong Kong dollar, U.S. dollar, Japanese yen, pound and Chinese 100 yuan banknotes are seen in this picture illustration, January 21, 2016. REUTERS/Jason Lee/Illustration/File Photo

Investors are rethinking long-held bets on a Nov. 8 victory for Democrat Hillary Clinton. Clinton held a 5 percentage point lead over Trump, according to a Reuters/Ipsos opinion poll released on Monday, but some other polls showed her Republican rival ahead by 1 to 2 percentage points.

The dollar index .DXY, which measures the greenback against a basket of six major currencies, was last down 0.3 percent at 97.403, after falling 0.6 percent to 97.178, its lowest level since Oct. 11.

The Mexican peso tumbled to a more than one-month low against the greenback, at 19.4667 pesos MXN= per dollar, on fears of how a Trump victory could hurt the Mexican economy.

Clinton is viewed as the candidate of the status quo, while there is greater uncertainty over what a Trump victory might mean for U.S. foreign policy, international trade and the domestic economy.

“There is a huge amount of unknown unknowns around Trump,” said Richard Franulovich, a senior currency strategist at Westpac Banking Corp in New York.

The euro EUR= was last up 0.3 percent at $1.1088 after rising 0.6 percent in afternoon trading to $1.1123, its highest level since Oct. 11. Against the yen the dollar was down 0.7 percent, at 103.40 yen, after falling 1 percent earlier to 103.03 yen, its lowest level Oct. 10.

The dollar was last down 0.2 percent against the Swiss franc CHF=, at 0.9733 franc, after earlier falling about 0.6 percent to 0.9695, its lowest level in roughly a month.

The dollar pared losses after the Federal Reserve kept interest rates unchanged in its last policy decision before the U.S. election, but signaled it could hike rates in December as the economy gathers momentum and inflation picks up.

The move in the dollar was mild, analysts said, because U.S. political uncertainty largely overshadowed the central bank’s statement.

The Mexican peso suffered MXN= a roughly 1.4 percent drop against the dollar. A possible Trump victory has been viewed as a key risk for the Mexican currency given the candidate's promises to clamp down on immigration and rethink trade relations.

“The peso weakening is a reflection of the increase in momentum from the polls favoring Trump,” said Mazen Issa, senior currency strategist at TD Securities in New York.

Reporting by Sam Forgione; Additional reporting by Patrick Graham in London; Editing by Nick Zieminski and Leslie Adler