Dollar rebounds off March 2018 low as Georgia elections point to Dem sweep
The dollar bounced after sinking to its lowest level in nearly three years on Wednesday, with markets anticipating a Democrat win in the U.S. Senate election in Georgia that would clear the path for a larger fiscal stimulus package.
Democrats won one U.S. Senate race in Georgia and led in another on Wednesday, edging closer to a sweep in a previous Republican stronghold that would hand them control of Congress and the power to advance President-elect Joe Biden’s policy goals.
Analysts generally expect a Democrat-controlled Senate to be positive for economic growth globally and thus for most riskier assets, but negative for bonds and the dollar as the U.S. budget and trade deficits swell even further.
As markets priced in the Democrats winning both Georgia seats, the dollar index hit its lowest since March 2018 at 89.206, but rebounded to last trade up 0.015% at 89.48.
Fueling expectations of further stimulus measures was a weak report on the labor market in the form of the ADP National Employment Report, which showed private payrolls post their first decline in eight months as coronavirus cases surge. However, a reading on factory orders for November exceeded expectations and indicated a sustained manufacturing recovery.
Elsewhere, U.S. President Donald Trump escalated tensions with Beijing by signing an executive order banning U.S. transactions with eight Chinese software applications.
But after a fall of nearly 7% in 2020 and a drop of as much as 0.9% in the new year, the dollar turned higher as a crowded trade began to unwind, which was also supported by a climb in interest rates. Analysts still expect the longer-term trend for the greenback to be weaker, however.
The euro gave up earlier gains and was up 0.11% to $1.2312, after earlier having risen past major resistance to as high as $1.2349.
Bitcoin traded above $35,000 for the first time, rising to $35,879.35 in the Asian session and extending a rally that has seen it rise more the 800% since mid-March.
The gains eased slightly, with the cryptocurrency last up 4.81% at $35,676.61.
Dollar in doldrums as Democrat sweep clears way for larger fiscal stimulus
The dollar languished near its lowest level in nearly three years on Thursday after Democrats won control of the U.S. Senate, clearing the way for a larger fiscal stimulus under President-elect Joe Biden.
Currency markets were largely unperturbed by scenes of chaos in Washington as supporters of outgoing President Donald Trump stormed Capitol Hill.
Analysts generally assume a Democrat-controlled Senate would be a net positive for economic growth globally and thus for most risk assets, but negative for bonds and the dollar as the U.S. budget and trade deficits may widen further.
The dollar index was little changed at 89.321 in early Asian trade on Thursday, after dipping to its lowest since March 2018 at 89.206 overnight.
The yield on the benchmark 10-year Treasury note climbed as high as 1.054% on Wednesday for the first time since the market mayhem of mid-March.
Reference: Reuters
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