By Olga Cotaga
LONDON, Oct 28 (Reuters) - The dollar rose against the euro on prospects of a national coronavirus lockdown in France, with implied volatility gauges in the common currency and the yen hitting multi-month highs as traders positioned for next week's U.S. election.
The dollar fell against the safe-haven Japanese currency, as disappointment that the United States has not yet found a way to push through another round of fiscal stimulus also weighed on market sentiment.
President Emmanuel Macron will give a televised address on Wednesday, amid media reports that the French government may impose a lockdown from midnight on Thursday.
With news that Pfizer has not yet been able to determine how well its late-phase COVID-19 vaccine protects against the disease adding to the cautious mood, riskier assets fell across markets.
The euro was down 0.4% at $1.1753 EUR=EBS, while the yen rose 0.2% to 104.16 per dollar JPY=EBS, its highest in more than a month.
One-week implied volatility gauges in euro and yen rose to their highest in nearly seven months. EUR1WO=R, JPY1WO=R
That suggests investors are preparing for sharp price moves, with the biggest focus on the United States as it struggles to contain its coronavirus epidemic as people vote early in large numbers for what promises to be a pivotal election on Nov. 3.
Markets are pricing a high probability of a clear victory by presidential challenger Joe Biden, but some investors are sceptical because the polls did not predict President Donald Trump's win four years ago.
"This is why ... we have not seen the dollar strengthen as much as a result... Investors don't want to go long the dollar ahead of the (vote)," said Athanasios Vamvakidis, global head of G10 FX strategy at Bank of America.
Legal battles between Republicans and Democrats over how to count votes have also raised the risk that the outcome of the election will be disputed.
After the elections, the market's focus will again turn more towards the sharp rise in coronavirus infections, Vamvakidis added.
The dollar index - which tracks the currency against a basket of six currencies - edged up 0.2% at 93.31 =USD.
The yuan was flat at 6.7171 in the offshore market CNH=EBS, with one-week implied volatility in the Chinese currency spiking to its highest since the beginning of 2016. CNHSWO=
(Reporting by Olga Cotaga; editing by John Stonestreet)
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