FOREX-U.S. dollar gains on surge in COVID-19 cases, lockdowns in Europe

    * Germany, France announces restrictions as COVID cases rise
    * Implied volatility rises in yen, euro
    * Yen rises to 1-month high vs dollar
    * Graphic: World FX rates in 2020

 (Adds new comment, details on euro risk reversals, updates prices)
    By Gertrude Chavez-Dreyfuss
    NEW YORK, Oct 28 (Reuters) - The safe-haven dollar rose on Wednesday, pushing the euro to one-week
lows, on news of lockdowns in Germany and France as coronavirus cases surged, with implied volatility
gauges in the European currency and the yen hitting multi-month highs as traders positioned for next
Tuesday's U.S. election.
    Germany decided to shut bars and restaurants for a month and France prepared to tighten controls on
movement as the pandemic surged across Europe and financial markets tumbled at the likely cost of a second
    The European Commission proposed a series of new measures to fight the pandemic in the European Union,
calling the new spike in infections "alarming".
    "When things get scary everybody rushes to the dollar," said  John Payne, senior futures and options
broker, at Daniels Trading, in Chicago.
    "The currency markets right now are dealing with problems in Europe, and Europe – I don't know if the
market thinks they have a lot of bullets left to fire at this thing. From a quantitative easing
standpoint, that's what is going to come. You see the dollar being more attractive because maybe Trump
won't go in that direction."
    Traders were bracing for volatility as the U.S. election loomed.
    Democratic presidential candidate Joe Biden leads Republican President Donald Trump nationally by 10
percentage points, a Reuters/Ipsos poll showed.
    "We are seeing some position-trimming ahead of the election, with the market still short dollars,"
said Vassili Serebriakov, FX strategist at UBS in New York.
    "The expectation is for a Biden presidency and that is consistent with a weaker dollar story. But as
some of the polls have tightened the last couple of days, markets are just taking some risk off the table
given the uncertainty," he added.
    The UBS strategist said a Biden administration is seen de-escalating trade tensions with traditional
allies such as Europe and Canada, as well as China, which should improve market sentiment overall and
weigh on the dollar as a safe haven.
    In afternoon trading, the euro was down 0.4% against the dollar at $1.1754, after sliding to
a one-week low.
    One-month euro/dollar risk reversals, a gauge of currency sentiment in the options market
that measures the ratio of calls over puts, showed on Wednesday that investors were most bearish on the
European common currency since June.  
    The dollar though slipped 0.1% against the yen to 104.31 yen. Earlier, the greenback dropped
to a more than one-month low.
    The euro also fell 0.5% against yen to 122.60 yen, after earlier sinking to its weakest
since July. 
    One-week implied volatility gauges in euro and yen rose to their highest in nearly seven months.

    That suggests investors are preparing for sharp price moves, focused on both the European lockdowns
and the United States as it struggles to contain its coronavirus epidemic ahead of the pivotal election
next Tuesday.
    Legal battles between Republicans and Democrats over how to count votes have raised the risk that the
outcome of the election will be disputed.
    The dollar index, which tracks the greenback against a basket of six currencies, was up 0.3% at
    Elsewhere, sterling fell 0.5% versus the dollar to $1.2958.
    Currency bid prices at 2:54PM (1854 GMT)
 Description      RIC         Last           U.S. Close  Pct Change     YTD Pct     High Bid    Low Bid
                                              Previous                   Change                 
 Euro/Dollar                  $1.1753        $1.1796     -0.36%         +4.84%      +1.1799     +1.1718
 Dollar/Yen                   104.3000       104.4350    -0.11%         -3.95%      +104.5500   +104.1700
 Euro/Yen                     122.58         123.14      -0.45%         +0.52%      +123.1800   +122.1900
 Dollar/Swiss                 0.9099         0.9088      +0.10%         -5.98%      +0.9127     +0.9086
 Sterling/Dollar              1.2990         1.3047      -0.42%         -2.04%      +1.3063     +1.2918
 Dollar/Canadian              1.3301         1.3187      +0.83%         +2.36%      +1.3333     +1.3180
 Aussie/Dollar                0.7056         0.7129      -0.97%         +0.62%      +0.7157     +0.7038
 Euro/Swiss                   1.0694         1.0716      -0.21%         -1.46%      +1.0719     +1.0677
 Euro/Sterling                0.9045         0.9041      +0.04%         +6.99%      +0.9076     +0.9015
 NZ                           0.6653         0.6708      -0.79%         -1.10%      +0.6719     +0.6630
 Dollar/Norway                9.3495         9.1920      +1.73%         +6.60%      +9.3825     +9.2100
 Euro/Norway                  10.9934        10.8310     +1.50%         +11.75%     +11.0050    +10.8002
 Dollar/Sweden                8.8470         8.7226      +1.06%         -5.37%      +8.8622     +8.7200
 Euro/Sweden                  10.3981        10.2887     +1.06%         -0.68%      +10.4045    +10.2700
 (Reporting by Gertrude Chavez-Dreyfuss; Additional reporting by Herb Lash; Editing by Jonathan Oatis and
David Gregorio)