Dollar Climbs as FBI Letter Seen Bolstering Clinton’s Prospects

(Bloomberg) -- The dollar strengthened for the first time in seven days against its peers after the Federal Bureau of Investigation said it maintains the view that Hillary Clinton’s handling of her e-mails wasn’t a crime, boosting demand for riskier assets.

The U.S. currency headed for its biggest gain since July against the yen as the FBI statement provided a boost to the Democrat two days before voters decide whether she should become U.S. president. A Clinton victory is likely to bolster investor expectations for policy tightening by the Federal Reserve. The Mexican peso, considered a barometer for investors’ views on her Republican rival Donald Trump’s chances in the election, climbed as much as 2.5 percent versus the dollar. U.S. stock futures jumped while gold tumbled.

“If Trump were to win, it would appear it will be seen as risk-off and therefore the dollar would probably weaken and other haven currencies gain, but if it looks like Clinton is going to win the dollar looks more likely to firm,” said Stuart Bennett, head of Group-of-10 currency strategy at Banco Santander SA in London. “It’s a perception that the status quo is Clinton following on from Obama, whereas with Trump, the rhetoric and the change might make some of the Fed think they should maybe wait until March before hiking rates.”

The Bloomberg Dollar Spot Index, which measures the U.S. currency’s performance against a basket of 10 major counterparts, rose 0.4 percent as of 9:25 a.m. in London, following a six-day, 1.4 percent decline. The gauge had slumped on investor concern that Trump, who is perceived to be more unpredictable than his Democrat rival, would be likely to upend U.S. trade agreements as Clinton’s odds of victory declined last week.

The U.S. strengthened 1.4 percent to 104.61 yen. It gained 0.8 percent to $1.1052 per euro and 1 percent to $1.2396 against the pound.

The dollar will plunge toward the weakest since 2013 against the yen in the wake of an election victory for Trump, the most-accurate currency forecasters say. Within 24 hours, the greenback will drop to 100 yen or lower if Trump is voted president, according to the majority of the top 10 foreign-exchange analysts in Bloomberg’s third-quarter rankings. If Clinton wins, they see an advance.

The FBI’s statement “added some volatility to currency markets,” said Jason Wong, a foreign-exchange strategist at Bank of New Zealand Ltd. in Wellington. “The reaction implies an increased chance of a Clinton victory, as we’re seeing a modest recovery of the dollar after the losses seen when the FBI re-opened the case. The fortunes of the yen and peso have also been linked to the ebbing odds of Trump winning the election.”

The FBI’s announcement just over a week ago that it was looking into more e-mails sparked a selloff in risk assets and boosted havens such as the yen, gold and Treasuries. Bloomberg’s dollar gauge ended lower Friday for the sixth day in its longest stretch of declines since March. The peso’s fortunes have been tied to Trump’s campaign given his pledge to renegotiate trade deals with Mexico and to build a wall along the U.S. border.

--With assistance from Netty Ismail and Anooja Debnath To contact the reporters on this story: Narayanan Somasundaram in Sydney at nsomasundara@bloomberg.net, Charlotte Ryan in London at cryan147@bloomberg.net. To contact the editors responsible for this story: David Goodman at dgoodman28@bloomberg.net, Keith Jenkins, Todd White