The US dollar on Friday sank to its lowest level in more than two months against a basket of currencies, as vote counting for the contentious US elections slowly moved toward a divided government and investors predicted more losses for the currency.
Investors are betting that former US vice president Joe Biden is to become the next president but Republicans are to retain control of the US Senate, which would make it difficult for the Democrats to pass the larger COVID-19 relief package they have been pushing.
The need for more stimulus was underlined on Friday, when the US government reported that employers hired the fewest workers in five months in October.
It was the clearest evidence yet that the end of the previous fiscal stimulus and exploding new COVID-19 infections were sapping momentum from the economic recovery.
The surge of new coronavirus cases to record levels in several US states could also curb economic activity.
“We’re still left with the view that the US economy is decelerating, and that’s playing out in a markedly weaker dollar,” said Joe Manimbo, senior market analyst at Western Union Business Solutions.
The US dollar index fell 0.31 percent against a basket of six major currencies to 92.235, hitting its lowest level since Sept. 2. For the week, the index was down 1.92 percent.
A large decline in long-term US Treasury yields due to expectations for less fiscal stimulus, combined with a rally in equities and other riskier assets, has placed the US dollar under consistent selling pressure that is likely to continue.
“So far investors have been prepared to overlook the threat of a contested election, presumably seeing [US President] Donald Trump’s legal initiatives as frivolous, and these benign conditions have generated a broad-based dollar decline,” strategists at ING Groep NV said.
The US dollar fell further against the Japanese yen, trading at ￥103.255, close to an eight-month low.
Japanese Prime Minister Yoshihide Suga has vowed to work closely with overseas authorities to keep currency moves stable, because a strong yen is widely viewed as a threat to Japan’s economy.
To be sure, the US dollar could strengthen if the US vote counting continues to stretch out.
“The longer the vote counting goes, the more nervous the market could get and that could actually result in safe-haven flows for the greenback, but for now, it looks like there’s the potential for dollar sentiment to continue to erode in the weeks ahead,” Manimbo said.
In Taipei on Friday, the New Taiwan dollar declined against the greenback, losing NT$0.002 to close at the day’s low of NT$28.876. However, it gained 0.17 percent from a week earlier.
The onshore yuan gained to 6.5868 yuan per US dollar, the strongest in more than two years.
Many investors expect a Biden administration would slightly scale back Trump’s trade war with China, which should benefit the yuan.
Against a buoyant euro, the US dollar traded at US$1.1882 after falling 0.87 percent in the previous session.
The single currency has risen sharply this week on the US dollar’s weakness, but has also benefited from news of the EU inching closer to a budget deal.
Additional reporting by CNA, with staff writer
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