Dollar sinks after Biden wins US presidency

SYDNEY (Reuters) – The dollar hit a 10-week low on Monday as investors announced Joe Biden’s election as President of the United States by buying traded currencies believing a White House calmer could stimulate global trade and that monetary policy will remain easy.

Chinese yuan CNY = Hits 28 Month High, New Zealand Dollar NZD = D3 rose 0.6% to a 19-month high and the Australian dollar AUD = D3 hit a seven-week high as the dollar index fell to its lowest since early September = USD.

Sterling GBP = D3 reached its highest for more than two months as the euro EUR = rose 0.1%, extending a nearly 2% gain from last week to a two-month high at $ 1.1895.

Biden crossed the threshold of 270 constituency votes required for victory on Saturday by winning the state of Pennsylvania. Republicans appear to have retained control of the Senate, although the final makeup may not be clear until the second round of voting in Georgia in January.

“The result is ideal from a market perspective,” said Michael McCarthy, chief strategist at CMC Markets in Sydney.

“Neither party controls Congress, so trade wars and tax increases are largely off the agenda.”

The prospect of a greater stalemate also means that expectations of a massive US fiscal stimulus package have been lowered, pushing bond yields down in anticipation of lower borrowing and deeper quantitative easing. from the Federal Reserve.

The good mood made stocks and the Japanese yen jump, a safe haven JPY = slipped a fraction to 103.42 per dollar – just below the eight-month high reached on Friday when lower US yields deterred investment inflows from Japan.

The yuan, particularly sensitive to the election outcome due to the perception that Biden will take a softer or more predictable line on China, was also boosted by strong Chinese trade data over the weekend to settle at 6.5758 for a dollar.

The South Korean won KRW = hit a 21-month high at 1,115.33 to the dollar and the Mexican peso MXN = rose 0.7% to 20.3980 per dollar, its highest since March.

“The pullback from the weak dollar is probably going to have a little bit of work in Fed terms and also less trade tension as something positive for other currencies,” said Westpac currency analyst Sean Callow.

RISKS REMAIN

The sale was held in check by underlying viral concerns and because Donald Trump, the first incumbent to lose a re-election candidacy in 28 years, made no sign of conceding while waging legal battles to overthrow the result.

Traders are also wary of further lockdowns as coronavirus cases rise, with the global number of infections surpassing 50 million on Sunday, with cases in the United States surpassing 10 million.

“For me, the weaker dollar needs to be reassessed,” said Hayden Briscoe, head of fixed income at UBS Asset Management in Hong Kong.

He referred to the possibility of further lockdowns in the United States or the hope of a disappointing European recovery in the end as major risks to the dollar falling.

Europe’s fiscal and monetary responses to a second wave of coronavirus infections, which have already resulted in further restrictions on daily life, will be at the center of concerns when European Central Bank President Christine Lagarde takes charge. word Thursday.

Later Monday, 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 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 by more than 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.