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Dollar hunkers down as Biden inches closer to White House

TOKYO (Reuters) - The dollar hunkered down to trade in a tight range against most currencies as investors awaited final vote counts in a nail-biting U.S. election that has seen Democrat Joe Biden edge ever so closer to the White House.

FILE PHOTO: U.S. Dollar banknotes are seen in this photo illustration taken February 12, 2018. REUTERS/Jose Luis Gonzalez/Illustration

Financial markets, however, were braced for days or even weeks of uncertainty as Republican incumbent President Donald Trump has opened a multi-pronged attack on vote counts in several states by pursuing lawsuits and a recount.

That could hamper the dollar in the short run, traders say.

Elsewhere, sterling fell against the dollar and the euro after a media report that the Bank of England, which announces a policy decision later on Thursday, is considering negative interest rates.

The Federal Reserve, which is expected to keep policy on hold on Thursday, is also in focus as traders navigate market volatility in the wake of a knife-edge U.S. election that has pushed up the yuan and the Mexican peso.

Biden has claimed the pivotal Midwestern states of Wisconsin and Michigan. Results from other important swing states are expected to trickle in later in the day.

Expectations that a Biden win will take a slightly softer tone on trade policy is likely to weaken the dollar against the currencies of countries that often faced the threat of tariffs during Trump’s administration, analysts said.

“The moves in the yuan and the peso show that the market is trying to price in a Biden victory,” said Masafumi Yamamoto, chief currency strategist at Mizuho Securities in Tokyo.

“For slightly different reasons, we could also see the euro gain against the dollar.”

The euro bought $1.1736 in Asia on Thursday, steady from the previous session.

The British pound fell 0.19% to $1.2967. Against the euro, the pound fell 0.3% to 90.55 pence.

The dollar was little changed at 104.37 yen.

Even if Biden manages to surmount the legal challenges from Trump to become the next president, Republicans look likely to retain control of the Senate and can use that to stymie Biden’s fiscal policy agenda - another complicating factor for currency traders.

Investors in Asia will closely watch to see if the onshore yuan extends gains versus the dollar when trade opens later today, as China’s currency has become a popular trade to bet on a Biden victory.

The Mexican peso, which had suffered from the Trump administration’s hard line on trade, was steady at 20.94 after jumping by 0.9% on Wednesday.

Reporting by Stanley White; Editing by Shri Navaratnam

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