* Dollar rebounds from earlier 2 percent fall to hit one-week high
* Mexico peso tanks to record low
* Safe-haven currencies jump on news, but largely retrace gains
* Euro reverses early gains, hits one-week low vs dollar (Updates to U.S. market open, recasts story, adds quote)
By Dion Rabouin
NEW YORK, Nov 9 (Reuters) - The dollar rose in early North American trading as investors re-evaluated the impact of the victory of Republican Donald Trump in the U.S. presidential election.
The dollar had fallen 2 percent in the aftermath of Trump's shock win over heavily favored Democrat Hillary Clinton, kindling fears of economic and political turmoil and calling into question the rise in U.S. interest rates that had been expected in December. despite Clinton being viewed as the status quo candidate who would leave a December rate hike on the table, some strategists say Trump's protectionist proposals, tax cuts and promises to make U.S. companies operating overseas bring back more of their income to be taxed could be positive for the dollar in the medium term.
"The one thing we do know is we're likely to see greater deficit spending from him with tax cuts and infrastructure spending and with the protectionist policies that (Trump's) looking to put in place that will likely put upward pressure on wage growth and inflation," said Scott Smith, senior corporate FX trader and market analyst at Cambrdige Global Payments in Toronto.
The upward pressure would likely lead to the Federal Reserve raising U.S. overnight interest rates at a faster pace than it is currently projected to do, Smith added.
Markets initially entered full risk-aversion mode, with investors scurrying out of the dollar and Mexican peso - which hit a record low - and into perceived safe havens such as the Japanese yen JPY= .
The euro fell EUR= to its lowest since Oct 31 against the dollar after U.S. stock markets opened, falling to $1.0938. It had risen as high as $1.1299 overnight as the likelihood of a Trump victory began to look more certain.
The dollar remained lower against the yen JPY= , down 0.6 percent at 104.55 yen, but recovered substantially from its overnight low of 101.15 yen.
The dollar index .DXY , which tracks the greenback against six major world currencies, touched its highest level since Nov. 1.
The Mexican peso, a barometer of market expectations for a Trump presidency, plunged more than 13 percent at one point to an all-time low just below 21.00 pesos per dollar. It recovered some ground to trade around 19.93 pesos per dollar, but remained down more around 9 percent on the day. 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
(Editing by Mark Heinrich and Chizu Nomiyama)