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FOREX-Dollar inches lower, all eyes on U.S. voting

Published 08/11/2016, 08:17 pm
Updated 08/11/2016, 08:20 pm
© Reuters.  FOREX-Dollar inches lower, all eyes on U.S. voting
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* Dollar dips slightly ahead of presidential vote

* Trump victory might knock 3-4 percent off greenback

* Weak China data knocks Aussie, renminbi

By Patrick Graham

LONDON, Nov 8 (Reuters) - The dollar inched lower ahead of voting in the U.S. presidential election on Tuesday, a sign of last-minute nerves over the chances of a victory for Donald Trump that traders and analysts say would knock several percent off the greenback's value.

On Monday, markets had turned away from the Trump-driven "risk-off" plays that have knocked the dollar in the past week as odds on a victory for Democratic candidate Hillary Clinton hardened, helped by an all-clear in an FBI investigation of her use of personal email while serving as secretary of state.

A Trump victory would come as a shock, as the market is pricing in less than a 30 percent chance of that happening. But investors are mindful of the precedent of Britain's referendum on EU membership in June, which confounded the polls by delivering a shock vote for Brexit.

More broadly, a Trump victory is expected to drive capital into the perceived security of the Japanese yen and Swiss franc, and to a lesser extent the euro.

"Versus the yen the market pricing is for a 3-4 percent fall on a surprise outcome," said Josh O'Byrne, a currency strategist with U.S. bank Citi in London.

"All the volatility is priced on that side ... but it doesn't feel like it will have quite as much of an impact as the Brexit vote, at least for G10 currencies."

Sterling sank by more than 10 percent in the aftermath of Britain's vote to leave the EU.

The dollar, steadily on the rise in recent months, dipped just over 2 percent against the basket of currencies that measures its broader strength after a surge for Trump in the polls 10 days ago.

The index was 0.2 percent lower on the day on Tuesday at 97.585. It was steady against the yen and 0.2 percent lower against the euro at $1.1062.

Elsewhere, a bigger than expected dip in China's exports and imports knocked as much as a third of a percent off the Australian dollar, pointing to weak domestic and global demand in the biggest buyer of its commodities.

China's renminbi was also nearing 6.80 per dollar CNH= and is expected to suffer badly if Clinton wins.

"The China economy remains stagnant,"said Masashi Murata, senior currency strategist at Brown Brothers Harriman in Tokyo.

"The renminbi is likely to continue to drop against the U.S. dollar and the euro due to capital outflows and the negative outlook for the Chinese economy," he said.

Britain's pound, which has gained strongly since a court decision last week against the government's plan to trigger EU divorce proceedings without a vote of parliament, was also up 0.3 percent at $1.2434. GBP=

Japanese Finance Minister Taro Aso said on Tuesday that Japan would need to respond to currency market moves if results of the U.S. presidential election were to cause a sudden spike in the yen. won't comment on results of other country's elections. But if it were to affect currencies, we would need to watch and respond, as stability in currencies is always important," Aso told reporters after a cabinet meeting. (Editing by Mark Trevelyan)

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