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Dollar Edges Lower; Presidential Election Looms Large

Forex Oct 27, 2020 04:00AM ET
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By Peter Nurse

Investing.com - The dollar edged lower in early European trade Tuesday, handing back some recent gains, although activity is starting to weaken as the U.S. presidential election draws near.

At 3 AM ET (0800 GMT), the Dollar Index, which tracks the greenback against a basket of six other currencies, was down 0.1% at 92.985, after posting gains Monday on the back of increasingly negative news surrounding the second wave of the Covid-19 pandemic.

Elsewhere, EUR/USD was up 0.1% at 1.1820, USD/JPY was largely flat at 104.80, while USD/CNY was flat at 6.7110.

The number of Covid-19 cases has now reached over 43 million cases globally, according to Johns Hopkins University data, with a number of countries, including the U.S., Russia and France, all setting new records with tens of thousands of new daily coronavirus infections this week.

However, trading ranges are becoming more limited as growing wariness about the U.S. presidential election is starting to limit large currency movements. With a week remaining, polls are giving Democrat candidate Joe Biden a solid lead over President Donald Trump nationally, albeit only a narrow one in certain key swing states.

“Almost everyone already agrees that Biden will win and THE consensus trade ahead of such a Biden victory is probably to be short USD/CNY. Biden’s less aggressive policy stance on China has been front-run, why it may make sense to expect some profit-taking on such a view should Biden actually win,” said analysts at Nordea, in a research note.

Elsewhere, GBP/USD was unchanged at 1.3023, remaining above the 1.30 level, with Brexit talks, which resumed last Thursday, extended to Wednesday.

“As negotiations are now set to extend for a few more weeks, GBP is temporarily navigating some calmer waters, but as soon as the new deadlines approach and GBP volatility peaks up again, a neutral positioning is yet another factor adding to the downside-skewed balance of risks for the over-complacent sterling,” said analysts at ING, in a research note. 

Also, USD/TRY rose 0.7% to 8.1309, continuing to rise above the psychologically-important 8.0 level, despite Turkey’s banking regulator taking another step to slow lending a in try and stop the lira’s rout.

The regulator said late Monday that banks will be able include foreign-currency loans extended to other local lenders for one year when calculating their asset ratio, making it easier for them to meet the requirement.

 

Dollar Edges Lower; Presidential Election Looms Large
 

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