The dollar index was flat at 103.91, after plummeting as low as 103.67 on Monday for the first time since October 21
The dollar started Tuesday on the defensive as traders squared positions on the day of the U.S. presidential election, after recent polls dented some market bets on a victory for Republican Donald Trump.
Democrat Kamala Harris has also experienced improving odds on election gambling sites and has a marginal lead on PredictIt, although Polymarket continues to show Trump as favourite.
In recent weeks, financial markets and some betting platforms had leaned strongly in favour of a win for Trump, whose tariff and immigration policies are considered inflationary by analysts, leading to a rise in U.S. Treasury yields and gains for the dollar.
Overnight, though, the U.S. currency plunged 0.76% against the euro to a three-week low after a weekend opinion poll showed Harris with a surprise lead in Iowa, a traditional Republican stronghold. Overall, polls continue to show a tight race.
The dollar index was flat at 103.91 as of 0349 GMT, after plummeting as low as 103.67 on Monday for the first time since October 21. Last week it soared to the highest since the end of July at 104.63.
The euro was little changed at $1.0877, after rising to $1.09145 in the earlier session for the first time since October 15.
Against the yen, the dollar traded at 152.365, after sliding to 151.54 overnight, a one-week low.
We judge financial markets are now positioned for a Harris win, according to Carol Kong, a currency strategist at Commonwealth Bank of Australia.
The USD can therefore drop modestly by 1%‑2% this week if Vice President Harris wins and rise materially if Trump wins, she added. Any delays and/or disputes over vote counting can also add to currency volatility this week.
