A gauge of the dollar fell the most since mid-September and Treasury futures rose as polling data ahead of Tuesday's US elections prompted some investors to pare the so-called Trump trades.
The Bloomberg Dollar Spot Index dropped as much as 0.6% on Monday, while Treasury futures edged higher with the cash market closed due to a holiday in Japan. The Mexican peso rose nearly 1% to lead gains among emerging-market currencies, underscoring how some investors are re-thinking the odds of a clear victory of Republican candidate Donald Trump.
They are also thinking over bullish dollar wagers — long favored as a prime play for Trump's win — after weekend polling numbers suggested his Democratic rival Kamala Harris might be edging ahead in some swing states. The overall race is still neck and neck with no clear winner, adding to risks of amplified market swings when voting begins.
“After going into the weekend pricing in about a 42% probability of a Republican sweep, markets are less certain this morning and have hastily stripped out some of the premium built into the ‘Dollar Trump Trade',” Tony Sycamore, analyst at IG Markets, wrote in a note.
The dollar declined against all its Group-of-10 peers with the Norwegian krone and euro advancing more than 0.5%. Asian currencies also gained with the yen and offshore yuan rising 0.7% and 0.3%, respectively against the reserve currency.
A Des Moines Register/Mediacom Iowa poll showed Harris with a 3 percentage-point lead in the state over Trump. The survey, conducted by famously reliable pollster Ann Selzer, is viewed as a bellwether for how Harris may perform in nearby Wisconsin, particularly among women.
Still, Harris' advantage across all of the surveys was within the margin of error, and a NBC News poll released Sunday showed the race deadlocked.
“The stage looks set for a binary reaction,” Peter Dragicevich, strategist at Corpay, wrote in a note. A Trump win is “likely to see the dollar strengthen given his policy platform, with a Harris victory expected to weigh on the dollar.”
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