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SYDNEY (Reuters) – The dollar hit a 10-week low on Monday when investors announced the election of Joe Biden as president of the United States by buying currencies exposed to trade amid expectations that a calmer White House could boost world trade and that monetary policy will remain flexible.
The Chinese yuan CNY = reached a 28-month peak, the New Zealand dollar NZD = D3 reached a 19-month high and the Australian dollar AUD = D3 hit a seven-week high when the dollar index fell to its lowest level since early September = USD. The South Korean won KRW = It reached a 21-month high of 1,115.33 per dollar. GBP = D3 reached its highest level in more than two months, while the euro EUR = it was up 0.1%, extending a gain of nearly 2% from last week to hit a two-month high of $ 1.1895.
Biden crossed the threshold of the 270 electoral college votes needed for victory on Saturday by winning Pennsylvania’s state battleground. Republicans appear to have maintained control of the Senate, although the final makeup may not be clear until the runoff in Georgia in January.
“The result is ideal from a market point of view,” said CMC Markets Sydney Chief Strategist Michael McCarthy. “Neither party controls Congress, so both trade wars and higher taxes are largely off the agenda.”
The prospect of further stagnation also means that expectations for a massive US fiscal stimulus package have been lowered, causing bond yields to decline sharply in anticipation of lower borrowing and greater quantitative easing. from the US Federal Reserve
The broad weakness of the dollar caused the yen JPY = a firmer touch against the US dollar and just below Friday’s eight-month high of 103.18 yen per dollar, while lower US bond yields also made Treasuries less attractive to prodigious buyers in 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 stand at 6.5826 percent. dollar.
“The hangover from the dollar weakness will probably have a bit of a way to work in terms of the Fed and also less trade tension as a positive for other currencies,” said Westpac currency analyst Sean Callow.
The biggest moves were kept in check on Monday because currency markets had largely reacted to Biden’s victory on Friday and because Donald Trump, the first incumbent to lose a re-election bid in 28 years, has shown no sign. to give in.
“We would caution that elevated volatility is not necessarily behind us, even though the election outcome is almost resolved,” Commonwealth Bank of Australia currency analyst Kim Mundy said in a note.
The president, who has spent months trying to undermine election results with unsubstantiated allegations of fraud, vowed Saturday to go ahead with a legal strategy that he hopes will overturn the state results that gave Biden the victory.
Traders are also cautious as coronavirus cases rise, with the global infection count surpassing 50 million on Sunday as cases in the United States surpassed 10 million, fueling concerns of more closures.
Later on Monday are appearances by Bank of England Governor Andrew Bailey and Chief Economist Andy Haldane, at 1035 GMT and 1400 GMT, where there is talk of negative rates. Dallas Fed Chairman Robert Kaplan delivers a speech at 2200 GMT.
On Wednesday, the Reserve Bank of New Zealand meets, with expectations that it will hold rates, but sets the stage to turn negative next year.
In emerging markets, the expired Turkish lira TRYTOM = D3 it rose as much as 2% following the removal of the central bank chief and the resignation of Turkey’s finance minister over the weekend.
The lira has fallen 30% to record lows this year amid the coronavirus pandemic as investors were concerned about falling foreign exchange reserves and double-digit inflation.
Reporting by Tom Westbrook; Edited by Ana Nicolaci da Costa
