TOKYO (Reuters) – The dollar steadied against many currencies on Friday but traders say more losses are likely as a contentious U.S. presidential election diminished hopes for large stimulus to support the economy any time soon.

FILE PHOTO: A U.S. dollar note is seen in front of a stock graph in this November 7, 2016 picture illustration. REUTERS/Dado Ruvic/Illustration/File Photo

Investors are betting that Democrat Joe Biden will become the next president but Republicans will retain control of the Senate, which will make it difficult for the Democrats to pass the larger fiscal spending package they have been pushing.

Biden maintains an edge over President Donald Trump, but a few important states are still counting votes and Trump is mounting legal challenges to vote counts, so there is still a high degree of uncertainty.

The dollar index =USD against a basket of six major currencies stood at 92.641, close to a two-week low.

For the week, the dollar index was down 1.5%, on course for its biggest drop in almost four months.

A large decline in long-term Treasury yields due to expectations for less fiscal spending, combined with a rally in equities and other riskier assets, has placed the dollar under consistent selling pressure that is likely to continue.

“There is a green light for the resumption of dollar selling, reflecting past declines in real interest rates,” said Ray Attrill, head of foreign exchange strategy at National Australia Bank in Sydney.

“There’s an argument that the U.S. Federal Reserve will have to backstop risk assets. The pandemic is still trending in the wrong direction.”

The dollar traded at 103.46 yen JPY=D3 on Friday, 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.

Against the euro EUR=EBS, the dollar traded at $1.1819 after falling 0.87% in the previous session.

The British pound GBP=D3 traded at $1.3127, holding onto a hefty 1.23% gain from Thursday.

Voting tallies from several U.S. states continued to trickle in during the Asian session, but currencies showed little reaction because the declaration of an outright winner could take several more days or even weeks, some traders said.

“Trump is threatening to take legal action in order to win the election,” Koji Sasaki, president and managing partner of private equity firm T Capital Partners in Tokyo.

“If this (continues), there will be a political vacuum and anxieties about stagnation… could cause a weakening dollar and a stronger yen, which could have a negative impact on Japanese exporters.”

Investors were also awaiting the release of U.S. non-farm payrolls later on Friday, which is forecast to show a slight slowdown in job creation.

Worries about the U.S. economy are growing, which is a reason to expect declines in the dollar to continue into next year, some analysts say. The rise in new coronavirus cases to record levels in several states could also curb economic activity.

The onshore yuan CNY=CFXS fell slightly to 6.6307 per dollar but still remained close to its more than two-year high reached on Thursday.

Many investors expect a Biden administration will slightly scale back Trump’s trade war with China, which should benefit the yuan.

Elsewhere, the Australian dollar AUD=D3 fell against the greenback after the country’s central bank said it is prepared to expand bond purchases if needed to support the economy.

Reporting by Stanley White, Additional reporting by Junko Fujita; Editing by Sam Holmes, Himani Sarkar and Kim Coghill



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