* Dollar index <.DXY> dips
* Markets eye more global rate cuts, U.S. election outcome
* Australian dollar bounces back after big RBA rate cut
(Recasts, updates prices, adds comment, changes byline,
changes dateline, previous LONDON)
By Nick Olivari
NEW YORK, Nov 4 (Reuters) - The dollar fell against most
major currencies on Tuesday as investors await the result of
the U.S. Presidential election and look toward central bank
meetings later in the week.
Trade was subdued as U.S. investors went to the polls but a
victory by Democrat Barack Obama, which is widely anticipated
by the markets, is seen as dollar positive given he could have
an easier time passing his administration's agenda through the
Democrat-controlled Congress.
The Reserve Bank of Australia cut rates by a
more-than-expected 75 basis points and the European Central
Bank and Bank of England meet later in the week. Though rate
cuts typically erode support for a currency, given the global
financial crisis, moves to stimulate economies are being seen
as currency positive.
"Clearly there is interest out there to buy the dollar but
there is a little bit of taking money off the table in very
short-term long dollar positions," said John McCarthy, director
of foreign exchange trading at ING Capital Markets. "Today is a
weird day, the market is a bit nervous."
In early New York trade, the dollar index, which measures
the U.S. unit's value against a basket of currencies, was down
1.6 percent at 85.363 <.DXY>. The euro was up 1.4 percent
against the dollar at $1.2809 <EUR=> and up almost 1.8 percent
at 127.37 yen <EURJPY=>.
The dollar was up 0.3 percent at 99.38 yen <JPY=>.
The Australian dollar <AUD=> bounced back from an early
fall to $0.6597 after the Reserve Bank of Australia cut rates
by 75 basis points to 5.25 percent, more than the expected 50
basis points. It last traded up 1.9 percent at $0.6921.
Analysts said the euro was benefiting from the Aussie's
comeback, with the prospect of further large interest rate cuts
from the European Central Bank and Bank of England on Thursday
seen as stimulative to their respective economies.
"The current grim economic conditions could justify a cut
of any magnitude," Calyon analysts wrote in a research note on
prospects for UK monetary easing.
ELECTION
As Americans voted on Tuesday, Obama was seen leading in
the polls in five out of 8 key states. For more details, click
[].
Though an Obama victory was seen as marginally more dollar
positive, even a surprise win by Republican John McCain could
be supportive for the dollar, some said.
"In the broader picture, the fact that (President George
W.) Bush, who has taken a benign neglect stance to the dollar,
is leaving will be taken as a dollar positive," said Derek
Halpenny, European head of global currency research for Bank of
Tokyo-Mitsubishi-UFJ in London.
Obama was the winner in Dixville Notch, New Hampshire, the
tiny town that traditionally opens presidential voting right
after midnight. He gained 15 votes to McCain's six, becoming
the first Democrat to win there since Hubert Humphrey in 1968.
Trends in the race could become clearer soon after the
first polls begin to close at 6 p.m. EST (2300 GMT) in Indiana
and Kentucky on Tuesday. Voting ends over the next six hours in
the other 48 states.
Obama expanded his national lead to 11 points over McCain
in a Reuters/C-SPAN/Zogby tracing poll, up from 7 points on
Sunday. The telephone poll has a margin of error of 2.9
percentage points.
Democrats are also expected to expand their majorities in
both chambers of Congress. Combined with an Obama victory, that
would make it easier for his administration to push through
activist policies to boost markets.
But there was some risk of the Democrats holding too much
power, some analysts said.
"A landside Obama victory may raise the fear that Obama may
shift more to the left, prompting a dollar-negative reaction in
the short-term," BTM-UFJ's Halpenny said.
(Additional reporting by Tamawa Kadoya; Editing by Andrea
Ricci)
