By Charlotte Ryan Maciej Onoszko
Gauge of global currency swings declines most since June
Greenback strengthens against the yen for third-straight day
Gyrations in the $5.1 trillion foreign-exchange market waned as opinion polls put Hillary Clinton ahead of Donald Trump before U.S. voters cast their ballots in the presidential election.
A JPMorgan Chase & Co. gauge of expected swings in global currencies fell the most since June on Monday. At the same time, speculators paid higher prices for protection against the dollar tumbling versus the yen — a scenario markets have associated with a surprise Trump victory. The final Bloomberg Politics national poll before Tuesday’s election has Clinton ahead of Trump, 44 percent to 41 percent, when third-party candidates are included.
Volatility dipped as polls showed Democratic nominee Clinton re-established a firmer lead against Republican Trump after the Federal Bureau of Investigation said during the weekend that her handling of e-mails wasn’t a crime. Clinton is seen as a continuity candidate, while Republican contender Donald Trump is a political novice who has advocated policies such as winding back free-trade agreements that could send jitters across markets.
“Until we’re going to get the polls closing, we’re going to see limited price action,” said Alvise Marino, a foreign-exchange strategist at Credit Suisse Group AG in New York. He expects the U.S. dollar to weaken against Group-of-10 peers if Trump wins and to strengthen in case of a Clinton win.
The Bloomberg Dollar Spot Index, which measures the U.S. currency’s performance against a basket of 10 major peers, was little changed as of 10:40 a.m. in New York. It advanced 0.4 percent Monday, the biggest increase since Oct. 20, halting a six-day losing streak after the FBI comment on Clinton’s e-mails.
The greenback climbed 0.2 percent to 104.71 yen, building on Monday’s 1.3 percent surge, the biggest increase since Aug. 26.
The JPMorgan gauge of global exchange-rate volatility matched its biggest slide since June 28 on Monday. It fell to 9.7 percent, 0.4 percentage point above this year’s low reached last month. At the same time, hedging against a possible Trump victory was apparent. The premium charged for one-week protection from the dollar dropping versus the yen, compared with hedging against an increase, climbed to its highest level since June on a closing basis, according to risk-reversals data compiled by Bloomberg.At 11 p.m. New York time on Tuesday, polls close on the West Coast, leaving only Alaskans still voting. Traditionally, this is when the TV networks and the Associated Press would call the presidential race, even if they became certain of the outcome earlier in the night.
“The market sees a Hillary Clinton victory as dollar-positive while a Donald Trump victory as negative,” said Thu Lan Nguyen, a foreign-exchange strategist at Commerzbank AG in Frankfurt. “It’s doubtful that dollar recovery will continue throughout the day though. The market has learned from the Brexit referendum — while Hillary is ahead in the polls, it’s too close to call.”