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TOKYO (Reuters) – The dollar languished near its lowest level in almost three years on Thursday after Democrats took control of the U.S. Senate, paving the way for a larger fiscal stimulus under President-elect Joe Biden.
Currency markets were not disrupted by scenes of chaos in Washington as supporters of incumbent President Donald Trump stormed Capitol Hill.
Analysts generally assume that a Democrat-controlled Senate would be a net benefit for global economic growth and therefore for most risky assets, but negative for bonds and the dollar, as the US budget and trade deficits could shrink. dig further.
The dollar index was little changed at 89.321 at the start of Asian trade on Thursday, after falling to its lowest since March 2018 at 89.206 overnight.
The yield on the benchmark 10-year Treasury bill climbed to 1.054% on Wednesday for the first time since the stock market chaos of mid-March.
Masafumi Yamamoto, chief currency strategist at Mizuho Securities in Tokyo, sees the dollar fortunes being shared with Democrats controlling both chambers.
“The dollar will remain weaker against commodity currencies like Australia and emerging market currencies,” which benefit when risk sentiment is positive, he said.
At the same time, “the rise in Treasury yields should benefit the dollar against the euro and the yen, as the dollar has undervalued the potential for a US economic recovery under Biden.”
The riskier Australian dollar was little changed at 78.025 US cents after hitting an almost three-year high of 78.195 on Wednesday.
The euro gained 0.1% to $ 1.23385, approaching the level of $ 1.2349 it reached on Wednesday for the first time since April 2018.
The dollar fell 0.1% to 102.965 yen, after falling to 102.595 on Wednesday for the first time since March.
But after falling nearly 7% in 2020 for the dollar index and falling 0.9% in the new year, the US currency may have some breathing room after the unwinding of crowded trade.
“People have been bullish on the dollar for at least six or nine months,” said Minh Trang, senior currency trader at Silicon Valley Bank in Santa Clara, Calif.
“Obviously, you’re going to have to take a break from time to time.”
Bitcoin on Thursday marked a new all-time high of $ 37,386, extending a rise of more than 800% since mid-March.
It last traded at $ 37,382.
Reporting by Kevin Buckland; Additional reporting by Chuck Mikolajczak; Editing by Sam Holmes
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