Dollar flat as traders eye U.S. midterms, potential partisan gridlock
WASHINGTON/LONDON — The dollar was flat
on Tuesday as traders looked ahead to U.S. midterm elections and
hopes of China relaxing coronavirus restrictions faded, after
initial optimism that boosted investor sentiment and weighed on
the safe haven U.S. currency.
A conclusive result to Tuesday’s midterms could take days,
but forecasts are for a Republican victory, at least in the
House of Representatives, and consequently likely gridlock in
Some analysts said that outcome could be positive for bonds
and negative for the dollar if it leads to less fiscal stimulus
and a partisan impasse around increasing the debt limit.
“As we get into the early part of next year, when
discussions about the debt ceiling appear slated to come back on
the agenda again, that’s the point at which these sort of market
risks will matter,” said Bipan Rai, North America head of FX
Strategy at CIBC Capital Markets.
Republicans taking control of either one or both chambers of
Congress also probably means lawmakers will face difficulty
passing fiscal stimulus, with the likelihood that Federal
Reserve Chair Jerome Powell “can afford to take the foot off the
interest rate hike accelerator,” said Damien Boey, chief macro
strategist at Barrenjoey in Sydney.
The U.S. Federal Reserve’s rate-setting committee increased
rates by 75 basis points last week and Powell indicated that
hikes would continue, causing markets to reprice expectations of
the point at which they would peak.
The dollar index, which tracks its performance
against six major currencies, was at 110.19, down from as much
as 113.5 in the middle of last week.
Another factor that has restrained the dollar in recent days
was speculation that China might relax aspects of its dynamic
China’s strict virus policy includes lockdowns, quarantining
and rigorous testing, and officials said over the weekend the
measures are “completely correct” and will stay. But incremental
adjustments have been enough to stave off despair among traders.
The euro was down 0.09% to $1.001 on Tuesday, while
sterling was last trading at $1.1473, down 0.33% on the
The Japanese yen strengthened 0.51% versus the dollar
at 145.88 per greenback.
Japanese foreign currency reserves posted the
second-sharpest monthly decline on record in October as
authorities spent 6.35 trillion yen ($43.37 billion)intervening
to support the yen.
The yuan had its best day in two years on Friday and has
held most of those gains since, but gave back a little bit
through Tuesday to trade at 7.2553 per dollar as
fresh COVID-19 outbreaks chipped away at some of the optimism.
In cryptocurrencies, bitcoin fell more than 6% to
$19,412 and ether dropped sharply in moves traders
said were linked to concern for brokerage FTX, after rival
Binance said it would liquidate holdings of FTX’s native token.
Currency bid prices at 10:00AM (1500 GMT)
Description RIC Last U.S. Close Pct Change YTD Pct High Bid Low Bid
Dollar index 110.1800 110.2100 -0.02% 15.175% +110.6200 +110.0400
Euro/Dollar $1.0013 $1.0017 -0.04% -11.92% +$1.0031 +$0.9972
Dollar/Yen 145.8700 146.6350 -0.52% +26.72% +146.9300 +145.8700
Euro/Yen 146.07 146.91 -0.57% +12.09% +146.9900 +146.0000
Dollar/Swiss 0.9886 0.9887 +0.04% +8.44% +0.9927 +0.9880
Sterling/Dollar $1.1473 $1.1516 -0.39% -15.18% +$1.1535 +$1.1430
Dollar/Canadian 1.3489 1.3492 -0.02% +6.68% +1.3527 +1.3478
Aussie/Dollar $0.6484 $0.6482 +0.05% -10.79% +$0.6490 +$0.6445
Euro/Swiss 0.9899 0.9903 -0.04% -4.53% +0.9922 +0.9883
Euro/Sterling 0.8724 0.8700 +0.28% +3.86% +0.8744 +0.8692
NZ $0.5941 $0.5941 +0.00% -13.20% +$0.5952 +$0.5899
Dollar/Norway 10.2705 10.2140 +0.68% +16.73% +10.3160 +10.2530
Euro/Norway 10.2847 10.2324 +0.51% +2.71% +10.3029 +10.2356
Dollar/Sweden 10.7989 10.8316 -0.40% +19.76% +10.8958 +10.8019
Euro/Sweden 10.8142 10.8580 -0.40% +5.67% +10.8850 +10.8110
(Reporting by Hannah Lang in Washington and Alun John in
London; Editing by Stephen Coates, Himani Sarkar, Ed Osmond,
Tomasz Janowski and Mark Heinrich)
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