Dollar dips, risk appetite jumps as Americans head to the polls
The U.S. dollar dipped on Tuesday as traders awaited the outcome of the U.S. presidential election.
The dollar was down 0.6% against a basket of currencies at 93.61 after hitting a month high on Monday.
Analysts believe a Biden win would weaken the dollar as the former vice president is expected to spend big on stimulus and to take a freer approach to trade, boosting other currencies at the dollar’s expense. They cautioned, however, that uncertainty was very high about the election outcome and that taking positions might prove premature.
The euro extended gains and rose 0.5% against the dollar, crossing the $1.17 bar, while sterling also rose slightly to just below $1.30.
Investors had taken a more cautious approach as the election neared. Rather than outright bets on a particular outcome, many traders had flocked to the safety of dollars so that they were well positioned to take advantage of volatility when results arrive.
Meanwhile, European stock markets were making strong gains while euro zone government yields rose and oil prices extended their rally, exposing how investors were gradually switching from a cautious mood and getting ready to bet on a clear victory for the Democratic candidate.
“The markets tempted fate on Tuesday morning, forgetting the lessons of 2016 as they pre-emptively celebrated a Joe Biden victory,” warned Connor Campbell, an analyst at Spreadex.
The safe-harbor yen was also slightly higher, up 0.03% at 104.69 per dollar.
Goldman Sachs drops the euro from its list of currencies expected to surge against the dollar
Goldman Sachs has dropped the euro from its list of major currencies backed to outperform against the dollar in the aftermath of the U.S. election.
The Wall Street giant recommended a series of short positions for the dollar against G-10 currencies in early October, warning that the risks arising from vaccine trials and the U.S. election are skewed to the downside for the greenback.
Reference: CNBC
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