NEW YORK (AFP) - The dollar traded mixed as the market positioned for the knife-edge US presidential election, and the possibility of a result clouded by challenges and litigation.
The euro slipped to 1.2741 dollars in late European trading from 1.2753 late Monday in New York.
The dollar dipped to 106.02 yen against 106.40 on Monday.
The US currency extended gains seen against the euro as crude oil futures fell below the 50-dollar level, but the decline also eased pressure on the Japanese currency.
Market participants also kept a wary eye on the US election, with opinion polls showing President George W. Bush and Senator John Kerry neck-and-neck.
"I think that whoever wins the election, the immediate reaction would be that the dollar would gain because that would clear some uncertainty," said Kikuko Takeda at Bank of Tokyo-Mitsubishi.
The market`s worst fear was that the result would be inconclusive and lead to a situation similar to the 2000 presidential election when the final result went unconfirmed for weeks amid a series of legal battles.
"There could be some risk associated with a delayed decision, based largely on the uncertainty," said Steven Saywell, senior currency strategist at Citibank.
"But even that I think would be temporary, certainly given that we do have experience of this actually happening four years ago."
In any case, what was really driving currencies was concerns over the funding of the large US current account deficit and the outlook for US interest rates, said Saywell.
"I think it`s going to continue to be the economic cycle and the structural imbalances that are likely to determine the path of the dollar. As far as actual drivers of the dollar are concerned, things are pretty negative out there at the moment," he said.
Some analysts argued that a clear victory for Kerry was likely to lead to a selloff in the dollar due to the uncertainty associated with political change, while an emphatic victory for Bush could spark a dollar rally.
But few market watchers expected any respite for the dollar to last long, while most appeared to be bracing for a spell of uncertainty.
"Newswire polls show near unanimity among currency strategists in thinking there will be no conclusive election result Wednesday, with one poll showing 24 of 25 analysts expecting the dollar to weaken further," Commerzbank analysts noted.
"While we also see the election having no discernable impact in reversing the dollar`s slide once the election outcome is known, we have stated that a decisive outcome this week will see the dollar rebound regardless of who wins as shorts are unwound with the removal of uncertainty."
In late New York trade, the dollar stood at 1.2094 Swiss francs from 1.2016 Monday.
Sterling was at 1.8379 dollars after 1.8343 late on Monday.
11/02/2004 - 22:58 GMT - AFP