By Kevin BucklandTOKYO (Reuters) -The dollar started Tuesday on the defensive as traders squared positions on the day of the U.S. presidential election, after recent polls dented some market bets on a victory for Republican Donald Trump.Democrat Kamala Harris has also experienced improving odds on election gambling sites and has a slight lead on PredictIt, although Polymarket continues to show Trump as favourite.In recent weeks, financial markets and some betting platforms had leaned strongly in favour of a win for Trump, whose tariff and immigration policies are considered inflationary by analysts, leading to a rise in U.S. Treasury yields and gains for the dollar.Overnight, though, the U.S. currency slumped as much as 0.76% against the euro to a three-week trough after a weekend opinion poll showed Harris with a surprise lead in Iowa, a traditional Republican stronghold. Overall, polls continue to show a tight race.The dollar index, which measures the currency against six major peers including the euro, was flat at 103.91 as of 0349 GMT, after slumping as low as 103.67 on Monday for the first time since Oct. 21. Last week it surged to the highest since the end of July at 104.63.The euro was little changed at $1.0877, after lifting to $1.09145 in the previous session for the first time since Oct. 15.Against the yen, the dollar traded at 152.365, after slipping to 151.54 overnight, a one-week low."We judge financial markets are now positioned for a Harris win," said Carol Kong, a currency strategist at Commonwealth Bank of Australia (OTC:CMWAY)investing.com