Yen Surges as Mexican Peso Drops Amid Tightening Election Race

(Bloomberg) -- Japan’s yen climbed to a one-month high as a tightening U.S. election race spurred demand for the currency, which is traditionally regarded as a haven.

The yen climbed against most major peers, while the Mexican peso fell as a Fox News report about a probe into the Clinton Foundation spurred anxiety, according to Commonwealth Bank of Australia and Royal Bank of Scotland Group Plc. The peso, which has become a proxy for investors’ perceptions of who will win the White House, has dropped more than 3 percent in the last three days after the Federal Bureau of Investigation said it was re-opening an inquiry into Hillary Clinton’s use of an e-mail server. A gauge of the greenback dropped for a fifth day, the longest losing streak since July.

“Fear of the unknown drives sentiment and, with voting gap traps and black swans circling traders’ heads, the markets will become increasingly defensive over the next few days,” said Stephen Innes, a senior trader at Oanda Corp. in Singapore. “From my chair, it remains too close to call,” he said, referring to the election.

The yen jumped 0.6 percent to 102.70 per dollar as of 6:51 a.m. in London. It reached 102.55, the strongest level since Oct. 4. The Mexican currency retreated 0.4 percent to 19.4415 against the greenback. The Bloomberg Dollar Spot Index was down 0.3 percent, taking its five-day losing streak to more than 1 percent. Japanese markets are shut for a holiday.

“The market’s concerned that the FBI investigation will swing next week’s election,” said Mansoor Mohi-uddin, a Singapore-based strategist at RBS.

The uncertainty ahead of the Nov. 8 election boosted the appeal of other safer assets. Treasury 10-year futures contracts for December delivery rose to the highest level in more than a week, while Australia’s 10-year bond yield slid four basis points to 2.3 percent.

The JPMorgan Chase & Co. index of global currency volatility rose to 10.39, the highest level since mid-September.

“As we run into the last few days, there will be controversies and all these rumors that will move the market in a bigger way,” said Peter Chia, foreign-exchange strategist at United Overseas Bank Ltd. in Singapore. “I expect the dollar weakness to persist all the way through election day. The impact of any economic data will be less in the coming few days.”

--With assistance from Narayanan Somasundaram and Wes Goodman To contact the reporters on this story: Lilian Karunungan in Singapore at lkarunungan@bloomberg.net, Netty Ismail in Singapore at nismail3@bloomberg.net. To contact the editors responsible for this story: Garfield Reynolds at greynolds1@bloomberg.net, Tomoko Yamazaki, Amit Prakash