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SYDNEY (Reuters) – The dollar started the week out of favor, as investors hailed Joe Biden’s election as President of the United States by buying traded currencies in hopes of a more stable approach of foreign policy, and while US monetary settings look easy for years.
Biden crossed the threshold of 270 constituency votes required for victory on Saturday by winning the state of Pennsylvania.
Against a basket of currencies = USD, the dollar fell slightly on Monday and was a trickle above a ten-week low.
The Aussie, the Kiwi, the Euro and the Pound edged up and were just shy of the multi-month peaks made on Friday when markets widely valued Biden’s victory. This tempered other moves, although the Chinese yuan CNH = D3 increased by a fraction to a 28-month high.
“The dollar has weakened in anticipation of a Biden presidency bringing calmer policy … and anticipating the Fed to come back to the rescue amid the short-term risk of rising COVID infection,” said Bank of Singapore analyst Moh Siong Sim said.
The yuan is particularly sensitive to the outcome, as traders believe Biden will bring a less confrontational, or at least more predictable, approach to relations with Beijing. Strong Chinese trade data was also released over the weekend.
The yuan rose about 0.1% at the start of Asian trade, while the Australian AUD = D3 and kiwi NZD = D3 each rose 0.3% and volatility gauges for most major currencies fell. The Australian rose more than 3% last week and the yuan more than 1.5%. [AUD/][CNY/]
Some apprehension remains as Donald Trump, the first incumbent president to lose a candidacy for re-election in 28 years, has made no sign of giving in as his campaign has continued with legal battles against the outcome.
The final composition of the Senate also depends on four undecided races, including two in Georgia that will not be resolved until the second round of voting in January.
“We would like to stress that the increased volatility is not necessarily behind us, even if the election result is all but settled,” Kim Mundy, Commonwealth Bank of Australia analyst, said in a note.
Stock markets had recorded their biggest weekly gains since April last week, as the dollar sank as investors bet Biden would win and Republicans retain the Senate.
This scenario would create a firmer hand in the Oval Office and a divided Congress would control leftist impulses on taxes or regulations, and likely leave the U.S. Federal Reserve with a lot of work to do, investors said.
“Republican Senate control will likely see them shed President Trump’s economic populism and pursue a significant decline in the U.S. budget deficit, which is expected to support a heavy budget drag in 2021,” said Matt Sherwood, chief investment officer. . at Perpetual in Sydney.
“This means that 2021 growth will now be more dependent on the US Fed,” he said, as well as a coronavirus vaccine, both of which would be negative for the US dollar.
On the horizon, appearances by Bank of England Governor Andrew Bailey and Chief Economist Andy Haldane at 10:35 a.m. GMT and 2:00 p.m. GMT, where discussions of negative rates are at the center of attention. Dallas Fed Chairman Robert Kaplan delivers a speech at 22:00 GMT.
The Reserve Bank of New Zealand meets on Wednesday, with expectations it will hold rates but set the framework to turn negative next year.
In emerging markets, the Turkish lira beaten TRYTOM = D3 rose 2% following the ouster of the central bank chief and the resignation of Turkey’s finance minister over the weekend.
The lira slipped 30% to record levels this year amid the coronavirus pandemic as investors worried about declining foreign exchange reserves and double-digit inflation.
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Sydney currency bid at 9:23 am (2223 GMT)
Description RIC Last US Close Pct Change YTD Pct High Bid Low Bid
Previous change
Session
Euro dollar EUR = EBS $ 1.1886 $ 1.1877 + 0.09% + 6.03% +1.1891 +1.1883
Dollar / Yen JPY = D3 0.0000 103.2800 + 0.00% -4.91% +0.0000 +0.0000
Euro / Yen EURJPY = 122.76 122.69 + 0.06% + 0.66% +122.8700 +122.7400
Dollar / Switzerland CHF = EBS 0.8980 0.9003 + 0.00% -6.96% +0.8981 +0.0000
Sterling / Dollar GBP = D3 1.3148 1.3150 + 0.04% -0.81% +1.3165 +1.3155
Canadian dollar CAD = D3 1.3037 1.3064 -0.18% + 0.38% +1.3062 +1.3039
Aussie / Dollar AUD = D3 0.7272 0.7261 + 0.27% + 3.76% + 0.7285 + 0.7275
NZ NZD = D3 0.6787 0.6773 + 0.19% + 0.85% + 0.6793 + 0.6785
Dollar / Dollar
All spots FX =
Tokyo spots AFX =
European spots EFX =
Volatilities FXVOL =
BOJ Tokyo Forex Market Information TKYFX
Reporting by Tom Westbrook
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