By Gina Lee
Investing.com – The dollar was down on Tuesday morning, giving up earlier gains. Tensions between the U.S. and China are rising and these concerns, along with continuing worries over the second wave of COVID-19, drove the steepest stocks selloff in a month and a bond rally.
The U.S. Dollar Index, which tracks the greenback against a basket of other currencies, edged down 0.11% to 92.942 by 10:31 AM ET (2:31 AM GMT).
On the COVID-19 front, the U.S., Russia and France all set new records for the number of daily COVID-19 cases. There are over 43.4 million cases globally as of Oct. 27, according to Johns Hopkins University data.
Some investors were wary of the dollar’s prospects ahead of the Nov. 3 U.S. presidential election.
“The dollar is broadly stronger, but not massively,” with structural forces such as low real yields holding back further gains adding to the wait-and-see approach to the election, National Australia Bank (OTC:NABZY) senior FX strategist Rodrigo Catril told Reuters.
“I think many would probably remember the bad experiences we had going into the Trump-Clinton election [in 2016] … if you had a position on [the election], you would have been whipsawed big time. I think the strategy this time is to travel light, and to choose the opportunity on the day rather than take on a very, very strong position going into the election,” Catril added.
With a week remaining, although polls are giving Democrat candidate Joe Biden a solid lead over President Donald Trump, both men were engaging in some last-minute campaigning in battleground states where the race is tighter.
Some investors view a Biden victory, especially if combined with a Democrat Senate, as negative for the greenback as the Democrats are expected to introduce stimulus measures with big price tags to combat COVID-19, which is expected to improve investor sentiment and boost riskier currencies.
Investors are already starting to bet on a Biden victory, with positioning data showing long bets on the safe-haven yen shrinking for a fourth consecutive week. But a fall in short bets against the yen pointed to increased uncertainty about the election’s outcome.
The USD/JPY pair inched down 0.10% to 104.71.
The USD/CNY pair edged down 0.12% to 6.7038. U.S.-China tensions mounted over a potential $2.4 billion sale of U.S. anti-ship missiles to Taiwan, potentially encompassing as many as 100 Harpoon Coastal Defense Systems built by Boeing (NYSE:BA). The systems in turn include up to 400 land-based missiles. China reacted to the news by slapping sanctions on U.S. companies, including Lockheed Martin (NYSE:LMT), Boeing Defense and Raytheon (NYSE:RTN) “in order to uphold national interests,” Chinese Foreign Ministry spokesman Zhao Lijian said on Monday. Meanwhile, the Chinese Communist Party will set the nation’s next five-year plan within the week.
The AUD/USD pair edged up 0.17% to 0.7134 and the NZD/USD pair edged up 0.1% to 0.6690. The GBP/USD pair inched up 0.10% to 1.3037.