Dollar gains as investors unwind bets on big fiscal spending
The U.S. dollar gained against a basket of currencies on Wednesday after Democrats looked unlikely to take control of the U.S. Senate, leading investors to unwind bets that a large fiscal package is likely.
Democrat Joe Biden held a narrow lead in Wisconsin on Wednesday after officials completed their vote count in the pivotal state, a major boost in his quest to win the U.S. presidency from Donald Trump.
A so-called “blue wave” of votes for Democrats did not emerge as many had expected, however, making it likely that Republicans will maintain control of the U.S. Senate, and oppose any massive stimulus spending increase.
“It’s going to be really tough to get additional stimulus going if we do have a Republican Senate,” said Bipan Rai, North American head of FX strategy at CIBC Capital Markets in Toronto. “If that is the case I would think that some of these ‘blue wave’ trades need to be unwound. Now what that means for the dollar is that we’re probably looking for a short squeeze.”
The dollar index rose 0.27% to 93.39, after reaching a one-month high of 94.31 overnight.
The euro gained 0.09% to $1.1722, after dropping to $1.1602, its lowest since July 24.
The greenback was little changed against the Japanese yen at 104.44 yen.
The offshore yuan hit a more than two-year high of 6.6190 against the dollar on Wednesday afternoon as Biden appeared to take the lead in the election. The yuan had weakened to a one-month low of 6.7741 in overnight trading.
Chinese yuan may trade closer to 6.65 against U.S. dollar by end 2020: Strategist
Marc Chandler of Bannockburn Global Forex discusses the U.S. dollar against emerging market bonds and the Chinese yuan.
Reference: CNBC
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