The dollar steadied against many currencies in the forex exchange on Friday. Traders expect more losses in the coming days. A contentious US presidential election is curtailing hopes for a large stimulus to support the economy any time soon.
Investors are betting that Democrat Joe Biden will take the presidential seat. However, Republicans will retain control of the Senate. Then it will be difficult for the Democrats to pass the larger fiscal spending they have been pushing for.
Biden maintains a lead over incumbent President Donald Trump, but a few more key states are still counting votes. Meanwhile, Trump is mounting legal challenges to vote counts, creating a high degree of uncertainty.
Certain factors have placed the dollar under consistent selling pressure that is likely to continue. These include a large decline in long-term Treasury yields due to expectations for less fiscal spending. Additionally, a rally in equities and other risk assets.
Currencies Movements
The dollar traded at 103.61 yen in Asia’s forex on Friday, near an eight-month low.
In order to keep currency moves stable, Japanese Prime Minister Yoshihide Suga has vowed to work closely with overseas authorities. This is because a strong yen is widely viewed as a threat to Japan’s economy.
The dollar traded at $1.1818 against the euro. The dollar fell by 0.87% in the previous session.
Holding onto a hefty 1.23% gain from Thursday, the British pound traded at $1.3128.
Close to a two-week low, the dollar index stood at 92.668 against a basket of six major currencies.
The dollar index declined 1.5% for the week, on course for its biggest drop in almost four months.
During the Asian session, voting tallies from several U.S. states continued. Currencies showed little movement, however, because the declaration of the winner could take several more days or even weeks.
Investors are also braced for the release of U.S. non-farm payrolls later on Friday. It is forecast to show a slight slowdown in job creation.
Analysts say growing worries about the U.S. economy leading to declines in the dollar are likely to continue through 2021.
New COVID-19 cases are rising to record levels in several states and could also curb the country’s economic activity.
The onshore yuan dipped slightly to 6.6366 per dollar. It still remained close to the more than two-year high it reached on Thursday.
Many investors hope that a Biden administration will slightly scale back Trump’s trade war with China as that would benefit the yuan.
Furthermore, the Aussie fell against the greenback in Asian trading. The country’s central bank said it is prepared to expand bond purchases if necessary to support the economy.
The decline in the Australian dollar also dragged the New Zealand dollar lower.
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