Dollar falls, Mexican peso hits record low as Trump wins U.S. election

By Jemima Kelly

LONDON (Reuters) - The dollar fell and the Mexican peso plunged to a record low on Wednesday as stunned investors digested the news that billionaire businessman Donald Trump had won the U.S. presidential election.

Republican candidate Trump sent shockwaves around global financial markets by defeating heavily favoured Democrat candidate Hillary Clinton. Trump's victory fuelled fears of economic and political uncertainty and called into question the rise in U.S. interest rates that had been expected in December.

Markets initially entered full risk-aversion mode, with investors scurrying out of the dollar and Mexican peso and into perceived safe-havens such as the Japanese yen, which gained as much as 4 percent at one point to hit a six-week high of 100.75 yen per dollar <JPY=>.

But after Trump's victory speech - during which he made no mention of his promised U.S.-Mexico border wall or the NAFTA trade deal with Mexico and Canada that he has said he will scrap or renegotiate - the dollar pared some of its losses to trade down half a percent on the day. It had earlier traded down as much as 2 percent <.DXY>.

"He could have stood up and listed off China, NAFTA, the wall – he didn't go anywhere on those policies, so that will be at least somewhat reassuring to markets," said Bank of Tokyo-Mitsubishi UFJ currency strategist Derek Halpenny.

The Mexican peso, which has served as a barometer of the markets' expectations for a Trump presidency, sank more than 13 percent at one point, to an all-time low just below 21.00 pesos per dollar, before recovering some ground to trade around 19.91 pesos per dollar, still down 8 percent on the day.

The yen traded up about 2 percent after the speech at 103.45 yen per dollar, in a volatile day that saw it soften to 105.480 earlier on, when last-minute opinion polls had put Clinton in the lead.

The mayhem in markets prompted Japan's top currency diplomat to signal Tokyo's readiness to intervene in currencies as the yen soared.

Trump, an anti-establishment political novice, is seen as a risk to global growth as he has pledged to renegotiate trade deals, impose high import tariffs and stirred fears of a currency war with China.

Clinton, conversely, had been seen by markets as more of a known quantity and likely to ensure stability.

Graphic of live election results:

Graphic of live market reaction:

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The greenback fell as much as 2.4 percent against the Swiss franc, another perceived safe-haven, to 0.95 francs <CHF=>, before recovering to trade down just 0.2 percent on the day to around 0.97 francs. The Swiss National Bank declined to comment on speculation that it had intervened to weaken the franc.

The scene was reminiscent of the turmoil that engulfed global financial markets after the June Brexit vote, when British voters opted to leave the European Union in a decision that wrongfooted investors and bookmakers. [MKTS/GLOB]

"It's fair to say that we are less surprised by the surprise this time, compared to the Brexit result," said one currency dealer at an international bank in London. "As Trump made his acceptance speech, he was quite conciliatory, and that put an end to the initial move."

Trump has pledged to renegotiate the North American Free Trade Agreement (NAFTA) with Mexico and Canada, a move that could damage the economies of the export-heavy U.S. neighbours.

The Canadian dollar <CAD=D4> fell to an eight-month low of C$1.3525 per dollar, before recovering around half of the day's losses to trade around C$1.3390.

The Australian dollar, sensitive to shifts in risk appetite, fell 1.6 percent to $0.7637 <AUD=D4>. The Aussie sank 4.3 percent to 78.25 yen, after briefly sinking to its worst intraday loss since May 2010.

(Additional reporting by Lisa Twaronite and Shinichi Saoshiro in Tokyo and Patrick Graham in London; Editing by Hugh Lawson)

Article Published: 09/11/2016