By Tom Westbrook
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.
Biden crossed the threshold of the 270 electoral college votes required for victory on Saturday by winning the Battlefield State of Pennsylvania. Republicans appear to have retained control of the Senate, although the final makeup is unclear 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 hikes are largely off the agenda. ”
The prospect of a greater deadlock also means that expectations of a massive US fiscal stimulus package have been lowered, which has pushed bond yields down significantly in anticipation of lower borrowing and a Greater quantitative easing from the US Federal Reserve.
The general weakness of the dollar had the yen
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 6.5826 for a dollar.
“The pullback from the weak dollar is probably going to have a bit of a run in Fed terms and also less trade tension as something positive for other currencies,” said Westpac currency analyst Sean Callow.
Larger moves were checked on Monday because currency markets largely reacted to Biden’s victory on Friday and because Donald Trump, the first incumbent to lose re-election in 28 years, made no sign of giving in.
“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, currency analyst at the Commonwealth Bank of Australia (OTC :), said in a note. .
The president, who spent months trying to undermine the election results with unproven allegations of fraud, pledged on Saturday to move forward with a legal strategy that he hopes will reverse the results of the state that gave victory to Biden.
Traders are also wary of the surge in coronavirus cases, with the global number of infections surpassing 50 million on Sunday as cases in the United States surpassed 10 million – raising concerns over more lockdowns.
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
The lira slipped 30% to record highs this year amid the coronavirus pandemic, with investors worried about falling foreign exchange reserves and double-digit inflation.