Dollar flat as traders eye U.S. midterms, potential partisan gridlock


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WASHINGTON/LONDON — The dollar was flat

on Tuesday as traders looked ahead to U.S. midterm elections and

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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

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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.

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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

zero-COVID policy.

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.

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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

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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

Previous Change


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

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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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