Dollar, Mexican peso, stocks sink as Trump edges ahead

© Reuters. A monitor displaying the Japanese yen's exchange rate against the U.S. dollar and Japan's Nikkei average is seen at a foreign exchange trading company in Tokyo

By Wayne Cole

SYDNEY (Reuters) - The U.S. dollar sank and stock markets slammed into reverse in wild Asian trade on Wednesday as every new exit poll in the U.S. presidential election showed the race to be a nail-biter, sending investors stampeding to safe-haven assets.

Much of the action was in currencies where the Mexican peso has become a touchstone for sentiment on the election as Republican Donald Trump's trade policies are seen as damaging to its export-heavy economy.

As of 0237 GMT, Trump appeared to be on track for 133 Electoral College seats to Clinton's 104. A tally of 270 is needed to win.

The neck-and-neck race caused the peso to gyrate wildly as results came in, especially from the key battleground state of Florida where Trump was holding a slim lead.

"It's Florida so far that's been the big drama of the morning in Asia. It's been swinging back and forth in projections at least 4-5 times," said Christopher Moltke-Leth, head of institutional client trading at Saxo Capital Markets.

"We've seen one of the most sensitive currencies, the MXN, has been extremely volatile this morning."

The dollar surged over 6 percent on the peso , though traders cautioned that it could turn on a dime.

But the story was very different against the safe-haven yen with the dollar shedding 2.4 percent to 102.72 yen . The euro gained 1 percent to $1.1130.

Graphic of live election results: http://tmsnrt.rs/2fxyZV0

Graphic of live market reaction: http://tmsnrt.rs/2fXfo0L

Live Coverage: http://live.reuters.com/event/election_2016

Asian stocks first rose only to retreat more than 1 percent as the session wore on and more election results flooded in, while U.S. stock futures (ESc1) surrendered modest gains and recoiled more than 3 percent.

Trump held slight leads in the vital battleground states of Florida, Virginia and Ohio, clinging to a narrow advantage over Democrat Hillary Clinton in key states that could decide their race for the White House.

TRUMP HOLDS NARROW LEAD

With voting completed in more than two-thirds of the 50 U.S. states, the race was too close to call in Ohio, Florida, North Carolina, Pennsylvania, New Hampshire and Virginia, states that could be vital to deciding who wins the presidency.

Markets have tended to favour Clinton as a status quo candidate who would be considered a safe pair of hands at home on the world stage.

The dollar turned down in part because analysts suspect the economic uncertainty caused by a Trump win would lessen the chance of the Federal Reserve hiking interest rates in December.

"In contrast, a Trump victory would trigger massive uncertainty that would likely undermine risk assets at least initially, which in turn could preclude a Fed rate hike this year," warned Michelle Girard, chief U.S. economist at RBS (LON:RBS).

Sovereign bonds flew ahead, pushing yields on 10-year U.S. Treasury notes (US10YT=RR) down sharply to 1.759 percent, having briefly touched a six-month high around 1.8960 percent.

In share markets, MSCI's broadest index of Asia-Pacific stocks outside Japan (MIAPJ0000PUS) swung to a loss of 1.5 percent, while the Nikkei (N225) sank 2.2 percent.

In commodity markets, gold climbed to $1,308.00 an ounce as the dollar slid.

Oil turned tail with U.S. crude (CLc1) shedding $1.34 to $43.63, while Brent (LCOc1) fell $1.24 to $44.80. [O/R]