* Dollar jumps as U.S. presidential race neck-and-neck
* Mexican peso, Chinese yuan hit hardest on trade war worries
* Trump projected to win Florida, Ohio; Rust Belt in focus
* Implied volatilities ease despite prospect of delay in poll outcome
By Hideyuki Sano and Eimi Yamamitsu
TOKYO, Nov 4 (Reuters) - The U.S. dollar jumped and risk-sensitive currencies weakened on Wednesday, as early results in the U.S. presidential election showed a very tight race, prompting a wind-back of bets on a victory by Democratic challenger Joe Biden.
President Donald Trump was leading in key battleground states including Florida and Ohio, while investors looked to whether he can retain Rust Belt states -- Michigan, Wisconsin and Pennsylvania -- that sent Trump to the White House in 2016. is clearly not a "blue wave" some people have been talking about," said Shinichiro Kadota, senior currency strategist at Barclays (LON:BARC), referring to a scenario where Democrats will handily win the White House as well as the control of both chambers of Congress.
(For multimedia U.S. election coverage, click: https://www.reuters.com/world/us-election2020 )
The rising likelihood of Trump's re-election hurts the currencies that have been hit hardest by Trump's trade policies, such as the Mexican peso and the Chinese yuan.
The Mexican peso fell almost 4% at one point and last traded at 21.435 per dollar MXN=D4 , down about 1.7% while the offshore Chinese yuan fell 0.4% to 6.7362 to the dollar CNH= , hitting a one-month low.
Among major currencies, the euro fell as much as 1% to a low not seen since late July and last stood at $1.1665 EUR= , down 0.45% on day.
The Australian dollar lost 0.6% to $0.7120 AUD=D4 while the British pound dropped 0.5% to $1.2983 GBP=D4 . The Canadian dollar fell 0.7% to C$1.3225 per U.S. unit CAD=D4 . All of them sank more than one percent at one point.
"I think the odds of a clean sweep are diminishing, almost by the minute. That reduces the possibility, or the likelihood at least of a large stimulus programme being agreed to in the first days of a Biden administration," said Matt Sherwood, head of investment strategy at Perpetual in Sydney.
The Japanese yen also gave up 0.35% to 104.87 per dollar JPY= .
The dollar index measuring the greenback against a basket of currencies .DXY gained 0.3% to 93.82.
Investors were increasingly braced for the possibility that the election results may not become clear on Wednesday, with markets hedging against the risk of a contested election or a potentially drawn out process as mail in ballots were counted.
"I don't think markets at this point are pricing in a victory of Trump or Biden. We just have to wait for the results," said Kyosuke Suzuki, director of forex at Societe Generale (PA:SOGN) in Tokyo.
"A contested election probably takes all of the SPX, bond yields and the USD (at least versus majors) down meaningfully," said Alan Ruskin, chief international strategist at Deutsche Bank (DE:DBKGn) in New York.
Still, implied volatilities on most major currency pairs have been relatively stable, suggesting investors expect markets to be able to take a protracted period of vote counting in their stride.
One-month eudo/dollar volatility EUR1MO= dropped to 7.90% from 8.29% on Tuesday while the dollar/yen volatility JPY1MO= dropped to 7.20% from 7.75%.
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https://tmsnrt.rs/3kTK3tk USD, MX peso, Chinese yuan on election night
https://tmsnrt.rs/2I4KWkd
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