
Please try another search
By Kate Duguid
NEW YORK (Reuters) - The U.S. dollar edged lower on Wednesday, with some investors tiptoeing back into riskier assets after midterm elections split power in the U.S. Congress, giving Democrats greater ability to check any major initiatives from President Donald Trump.
Traders pulled out of the safe-haven currency after the election results came in as expected. Some had worried that political instability might ensue if either party had won full control.
"There was this expectation that if we didn’t get a divided Congress, we might see risk sentiment becoming a little shaky, but since that didn’t happen we have a risk-on move," said Mazen Issa, senior foreign exchange strategist at TD Securities in New York.
The greenback has been the surprise winner in the global currency markets this year after Trump and congressional Republicans passed a significant tax cut, and strong economic growth prompted the U.S. Federal Reserve to start steadily raising interest rates.
Market watchers believe the outcome of the U.S. midterm, with Democrats taking the House of Representatives and Republicans keeping control of the Senate, would make further tax cuts and deregulation unlikely for now.
"For the dollar, there are fewer fiscal initiatives like tax reform to drive sentiment higher. Any sort of fiscal stimulus is less likely to be observed over the next two years," said Issa.
Prospects of less fiscal stimulus would also relieve the pressure on the Fed to keep raising interest rates and add downward pressure on U.S. Treasury yields and the dollar.
Some analysts had said a fully Republican Congress could have meant increased trade tension and a larger deficit.
Against a basket of other currencies (DXY), the dollar slipped 0.16 percent on the day, last at 95.838, its lowest level in two weeks. The yield on the benchmark 10-year Treasury note
Equity markets rallied as investors pushed funds into riskier assets, and on hopes that the reduced likelihood of more fiscal stimulus would bring the end to a multi-year U.S. rate hike cycle.
The euro (EUR=) gained half a percent to trade at $1.148. The single currency changed hands more than 1 percent above this year's trough of $1.1301 reached on Aug. 15.
Sterling
Are you sure you want to block %USER_NAME%?
By doing so, you and %USER_NAME% will not be able to see any of each other's Investing.com's posts.
%USER_NAME% was successfully added to your Block List
Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.
I feel that this comment is:
Thank You!
Your report has been sent to our moderators for review
Add a Comment
We encourage you to use comments to engage with other users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind:
Enrich the conversation, don’t trash it.
Stay focused and on track. Only post material that’s relevant to the topic being discussed.
Be respectful. Even negative opinions can be framed positively and diplomatically. Avoid profanity, slander or personal attacks directed at an author or another user. Racism, sexism and other forms of discrimination will not be tolerated.
Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at Investing.com’s discretion.