FOREX-Mexican and Canadian currencies rise, investors see Clinton winning debate

* Mexican peso climbs about 2 pct, Canadian dollar rises

* Dollar/yen erases earlier losses, up from 1-month low

* Clinton seen holding status quo, uncertainty over Trump (Updates, adds Canadian dollar)

By Anirban Nag

LONDON, Sept 27 (Reuters) - The Mexican peso rose 2 percent on Tuesday, recovering from record lows against the U.S. dollar, buoyed by a view that Democratic presidential candidate Hillary Clinton did better than rival Donald Trump in a television debate.

The peso was on track for its best daily performance since February, lifting the higher-yielding Canadian dollar along with it. Canada, like Mexico, has close trade ties with the U.S. and is part of the North American Free Trade Agreement.

Markets have tended to see Clinton as the someone who is likely to retain status quo, while few are sure what a Trump presidency might mean for U.S. foreign policy, international trade deals or the domestic economy.

Opinion polls have shown the two candidates in a tight race, with the latest Reuters/Ipsos (LSE: 0KA3.L - news) polling showing Clinton ahead by 4 percentage points, with 41 percent of likely voters.

As early risk aversion faded across markets, higher-yielding currencies like the Australian and New Zealand dollars also did well, rising 0.4 percent against the U.S. dollar. The safe-haven yen underperformed, falling 0.4 percent against the U.S. dollar,

"The market is dominated by risk-on. Not only the currencies of the neighbouring countries Mexico and Canada were able to appreciate notably, but also other conventional risk currencies such as Aussie, kiwi and the Scandinavian currencies," said Esther Reichelt, currency strategist at Commerzbank (Xetra: CBK100 - news) .

"Similar to the June 23 Brexit referendum date, Nov. 8 (the Presidential election date) entails some very binary risks. Either everything remains as it is which a Clinton victory would imply or there is a likelihood of everything or at least a lot changing rapidly."

Earlier, the Mexican peso hit record lows of around 19.92 pesos per dollar on concerns that a Trump victory would threaten Mexico's exports to the United States, its single biggest market. Data from the U.S. Commodity Futures Trading Commission on Friday showed that speculators had recently ramped up their bearish bets against the peso.

It was last trading at 19.5150, up around 2 percent on the day. Similarly the U.S. dollar was down 0.44 percent against its Canadian counterpart at C$1.3171, having hit a six-month high earlier in the Asian trading session.

The Democrat and Republican candidates traded barbs and accusations in their first debate.

"It may be that Clinton did a little bit better than was the initial expectation, or you could say that Trump didn't surprise in any way. Maybe the market was afraid that he was going to have something up his sleeve to surprise and make him look good," said Jasper Bargmann, head of trading at Nordea Bank (LSE: 0JNL.L - news) in Singapore. (Additional reporting by Masayuki Kitano; Editing by Andrew Heavens)