Dollar Investors Keep Calm Ahead of Election Hour

The U.S. dollar floated near a one-month high on Tuesday in forex exchange.  Investors chose to be cautious in the hours ahead of polls opening on election day in the United States.

Traders lately have flocked to the safety of dollars, positioning well to take advantage of volatility when results arrive.

The dollar held at 94.050, against a basket of currencies, just below a month-high hit on Monday.

Early in Asia trade, the safe-harbour yen was steady at 104.75 yen per dollar. The Japanese currency has also ground higher in recent weeks.

Antipodean currency and risk-sensitive Australian dollar was steady at $0.7054 ahead of a crucial central bank policy meeting. Markets will be expecting a rate cut and a shift to quantitative easing.

Democrat challenger Joe Biden has consistently shown to lead President Donald Trump in the opinion polls. 

A Biden victory could weaken the dollar as he intends to spend big on stimulus. A steadier foreign policy could lift trade-exposed currencies, according to analysts.

Moves on Tuesday were slight, as battleground states were too close to call. Moreover, the prospect of either a Trump victory or an inconclusive result will likely support the dollar.

Currency Movements

The New Zealand dollar was steady at $0.6630. Like the Aussie, it recovered from a Monday low along with a bounceback in equities. The euro sat just above a one-month trough at $1.1639 while sterling was below $1.30.

Despite the steady spot prices volatility gauges are soaring, an indication that things could get rough as election results arrive.

The one-week implied volatility for the euro and yen were both above 11%. It was the highest since the beginning of April. 

For the yuan, one-week implied volatility was over 12% which was a fraction below Monday’s five-year peak.

Besides election results, investors are closely watching the Reserve Bank of Australia’s (RBA) policy decision at 0330 GMT.

The RBA has flagged policy easing. Many economists expect it to take the form of a 15 basis point rate cut to a record low 0.1%. Moreover, a government bond-buying programme.

Meanwhile in other forex news, Hong Kong’s central bank is expected to sell extra debt to soak up liquidity. Funds are returning to the financial system after Ant Group Co.’s initial public offering.

There has been a heated demand for the share sale, in recent weeks. And it had kept local currency at the strong end of its trading band with the dollar.