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Dollar Weakens, Yuan Gains; Markets Look to Biden Presidency

ForexOct 09, 2020 02:57AM ET
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© Reuters.

By Peter Nurse

Investing.com - The dollar edged lower in early European trade Friday as investors start to factor in a Joe Biden presidency and the likelihood of more U.S. stimulus spending.

At 2:55 AM ET (0655 GMT), the Dollar Index, which tracks the greenback against a basket of six other currencies, was down 0.1% at 93.528, while USD/JPY was down 0.1% at 105.94.

Elsewhere, EUR/USD climbed 0.1% to 1.1771, GBP/USD rose 0.1% to 1.2950, while the risk-sensitive AUD/USD climbed 0.2% to 0.7178.

The latest opinion polls suggest Americans are steadily losing confidence in President Donald Trump's handling of the coronavirus pandemic, with his net approval on the key issue this election hitting a record low in a new Reuters/Ipsos poll.

With this in mind, and with Trump refusing to take part in the next presidential debate scheduled virtually for next week, traders are starting to factor in Democrat candidate Joe Biden winning the White House and adjusting their thinking as to what that means for additional stimulus.

“With Biden’s lead extending and the accompanying reduction in the likelihood of a contested outcome, the post-election dollar outlook looks fragile, particularly if larger post-election fiscal stimulus is delivered by the Democrats and the Federal Reserve keeps the narrative of low real rates for longer firmly in place,” said ING analysts, in a research note.

Additionally, talks have resumed between House Speaker Nancy Pelosi and Treasury Secretary Steven Mnuchin over coronavirus aid plans, a mere two days after President Donald Trump abruptly ended them, suggesting the Republicans feel they have lost this diplomatic battle.

Elsewhere, the Chinese yuan soared to a 17-month high, as the country’s markets reopened after the mid-autumn holiday break. 

At 2:55 AM ET, USD/CNY traded 1.1% lower at 6.7172, its biggest daily jump in nearly two years. In part this move is a catch-up of the week’s softening of the greenback, but it has also been helped by data released earlier in the day showing that September’s Caixin Services Purchasing Managers Index increased to 54.8 from August’s reading of 54.

Adding to the demand for the yuan is the idea that a Biden presidency would result in a steadier Sino-U.S. relationship, less inclined toward tariffs and trade disputes.

"Polls are showing that Biden is taking the lead... it means the risks of resuming a new trade war are getting smaller, so I think this is positive for the renminbi," said Ken Cheung, chief Asian FX strategist at Mizuho Bank in Hong Kong, in a Reuters report.



Dollar Weakens, Yuan Gains; Markets Look to Biden Presidency
 

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Comments (5)
Andrew carson
Andrew carson Oct 09, 2020 10:12AM ET
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The market is NOT looking for a Biden presidency. What planet are you on?! 🥴
Michael Payne
Michael Payne Oct 09, 2020 10:12AM ET
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Lol
justin namon
justin namon Oct 09, 2020 6:57AM ET
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And this right here is false advertisement. Market never has a clue:The December 2016 S&P 500 future rose in lockstep with Ms. Clinton’s election chances, suggesting that markets expect stocks to be more valuable under President Clinton than President Trump.
Richard Broome
Richard Broome Oct 09, 2020 6:54AM ET
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If Biden can't show up for an in person debate with President Trump. How can I have the confidence that won't stop leading from a basement. Besides he's a documented crook. Take your pick of what countries. let alone what they did to the United states!
Greg Hamilton
OptionsTrader Oct 09, 2020 6:40AM ET
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Since when does the market look forward to higher taxes and regulations?
dan mat
dan mat Oct 09, 2020 6:33AM ET
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That Biden "presidency" would mean the end of US global supremacy. US would become just another country buried in debt and will decay. Mark my words!
Bill Chan
Bill Chan Oct 09, 2020 6:33AM ET
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can't wait to see that
Bill Chan
Bill Chan Oct 09, 2020 6:33AM ET
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Anyone think that trump has win the trade war? already 2 years, how long he need to win the trade war? or lose
justin namon
justin namon Oct 09, 2020 6:33AM ET
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Pretty sure thats already the case but ok.
 
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