Investors are being forced to rethink their bearish outlooks for the dollar, after mounting worries about a messy US election stoked a recovery in the currency.

Expectations of volatility have risen across financial markets as investors brace for a messy outcome in the race between President Donald Trump and his Democratic rival Joe Biden. This month, Mr Trump refused to commit to accepting a potential defeat in the poll, repeating his claims about fraudulent mail-in votes.

As a result, large banks and investors have started to reconsider their view of the dollar’s path for the rest of the year. The currency fell 10 per cent from its coronavirus peak to its low in August. But months of an unknown outcome in the race for the White House could unsettle markets and send investors scrambling for the safety of the greenback, analysts say.