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Thursday, April 25, 2024

Dollar near one-week lows before U.S. election results; yuan soars

Democrat challenger Joe Biden is predicted a U.S. election win over President Donald Trump after pivotal victories in Michigan and Wisconsin but his party is falling short of expectations in Congressional elections, with the Senate looking increasingly likely to stay in Republican hands, making it hard to implement stimulus.

But financial markets were braced for days or even weeks of uncertainty as Trump has opened a multi-pronged attack on vote counts in several states by pursuing lawsuits and a recount.

“The dollar will probably be caught between a haven bid on the uncertainty of the disputed election and a lack of interest in shorting the currency on the prospects of a potential Biden win,” said John Velis, an FX and macro strategist at BNY Mellon.

The dollar index against a basket of six major currencies stood at 93.23, down 0.2% in early London trading.

Some of the biggest gains were seen in currencies which had borne the brunt of Trump’s protectionist policies in recent years, with the Chinese yuan briefly rising to more than a two-year high versus the greenback.

The euro bought $1.1760 on Thursday, up 0.3% from the previous session as some investors bet on a Biden victory.

“The euro was flying around in the last couple of days, to and fro, but in the end it does seem like the euro tends to be stronger under a Biden scenario,” said John Vail, chief global strategist at Nikko Asset Management.

The British pound broke above $1.30 after the central bank ramped up its bond purchase plan.

Broader currency market volatility gauges declined with a widely-watched index falling to more than three-month lows.

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