Greenback slips as Biden wins the US presidency
© Reuters. FILE PHOTO: US dollars are counted out by a banker at a bank in Westminster
By Tom Westbrook
SYDNEY (Reuters) – The dollar got off to a bad start on the week as investors welcomed Joe Biden’s election as US president by buying trade-exposed currencies in anticipation of a more stable foreign policy approach and the monetary framework in the US looking easy for years.
Biden passed the 270 electoral college vote required for Saturday’s victory by winning the battlefield state of Pennsylvania.
The dollar fell against a basket of currencies () on Monday and was a whisker above a ten-week low.
The euro and pound rose a little and were just shy of multi-month highs on Friday as the markets largely priced in a Biden win. That softened further moves, although those rose a fraction to a 28-month high.
“The dollar has weakened in anticipation of a Biden presidency that brings calmer policies … and the expectation that the Fed will come to the rescue again amid the near-term risk of rising COVID infection,” said Moh Siong Sim, FX analyst the Bank of Singapore.
The yuan is particularly sensitive to the outcome, as traders expect Biden to make relations with Beijing less confrontational or at least more predictable. Strong Chinese trade data was also released over the weekend.
The yuan rose about 0.1% in early Asia trade, while the Aussie and kiwi rose 0.3% each, and volatility indicators for most major currencies eased. The Aussie rose more than 3% and the yuan more than 1.5% last week. [AUD/][CNY/]
There are still some concerns as Donald Trump, the first incumbent president to lose a re-election bid in 28 years, has shown no sign of concessions as his campaign continued with legal battles against the outcome.
The final composition of the Senate also depends on four undecided races, including two in Georgia, which will not be cleared until after the January runoff election.
“We would point out that increased volatility is not necessarily behind us, even though the election result is pretty much clear,” said Kim Mundy, currency analyst with the Commonwealth Bank of Australia (OTC :), in a note.
Stock markets had posted their biggest weekly gains since April last week, while the dollar fell as investors bet Biden would win and Republicans would hold on to the Senate.
That scenario would create a more stable hand in the Oval Office, and a split Congress would review the left-wing stimulus for tax or regulation and likely leave the Federal Reserve with a lot of work, investors said.
“Republican control of the Senate is likely to see them dismantle President Trump’s economic populism and seek a substantial decrease in the US budget deficit, which will underpin a large budgetary strain in 2021,” said Matt Sherwood, director of investment strategy at Perpetual in Sydney .
“That means growth in 2021 is now more dependent on the Federal Reserve,” he said, as well as a coronavirus vaccine, both of which would be negative for the US dollar.
On the horizon are Bank of England Governor Andrew Bailey and Chief Economist Andy Haldane appearances at 1035 GMT and 1400 GMT talking about negative interest rates. Robert Kaplan, President of the Dallas Fed, will deliver a speech at 2200 GMT.
On Wednesday, the Reserve Bank of New Zealand meets expectations that it will hold rates but sets the framework to go negative next year.
In emerging markets, the run-down Turkish lira rose up to 2% over the weekend following the fall of the central bank chief and the resignation of the Turkish finance minister.
The lira is down 30% and hit lows this year amid the coronavirus pandemic as investors worried about falling foreign exchange reserves and double-digit inflation.
Bid prices at 9:23 a.m. in Sydney (2223 GMT)
Description RIC Last US Close Pct Change YTD Pct High Bid Low Bid
Euro / Dollar () $ 1.1886 $ 1.1877 + 0.09% + 6.03% +1.1891 +1.1883
Dollar / Yen 0.0000 103.2800 + 0.00% -4.91% +0.0000 +0.0000
Euro / Yen () 122.76 122.69 + 0.06% + 0.66% +122.8700 +122.7400
Dollar / Swiss 0.8980 0.9003 + 0.00% -6.96% + 0.8981 + 0.0000
Pound sterling / dollar 1.3148 1.3150 + 0.04% -0.81% + 1.3165 + 1.3155
Dollars / Canadians 1.3037 1.3064 -0.18% + 0.38% +1.3062 +1.3039
Aussie / dollar 0.7272 0.7261 + 0.27% + 3.76% + 0.7285 + 0.7275
NZ 0.6787 0.6773 + 0.19% + 0.85% + 0.6793 + 0.6785
Dollar / dollar
Tokyo Forex Market Information from BOJ