TOKYO (Reuters) – The dollar fell to its lowest level in nearly three years on Thursday after Democrats took control of the U.S. Senate, clearing the way for greater fiscal stimulus under the President sit Joe Biden.
Money markets were almost disturbed by chaos scenes in Washington when supporters of President Donald Trump sent off a storm on Capitol Hill.
Analysts generally accept that a Democrat-controlled Senate would be very positive for global economic growth and therefore for most risky assets, but negative for bonds and the dollar because the U.S. budget and trade deficits could expand further.
The dollar index remained unchanged at 89.321 in early Asian trading on Thursday, after falling to its lowest level since March 2018 at 89.206 overnight.
Yields on a 10-year Financial benchmark note climbed as high as 1.054% on Wednesday for the first time since market turmoil in mid-March.
Masafumi Yamamoto, chief financial strategist at Mizuho Securities in Tokyo, will see the dollar’s fortunes split with Democrats in control of both Houses.
“The dollar will remain weaker against commodity currencies such as the Aussie and emerging market currencies,” which is an advantage when risk sentiment is positive, he said.
At the same time, “the higher yield of the Treasury should benefit the dollar against the euro and the yen, as the dollar has been the basis for the potential for US economic recovery under Biden . ”
The most risky Australian dollar remained largely unchanged at 78.025 U.S. cents after touching a nearly three-year high of 78.195 on Wednesday.
The euro gained 0.1% to $ 1.23385, approaching the $ 1.2349 level it reached on Wednesday for the first time since April 2018.
The dollar fell 0.1% to 102.965 yen, after plunging to 102.595 on Wednesday for the first time since March.
But after a fall of nearly 7% in 2020 for the dollar index and a fall of as much as 0.9% in the new year, the U.S. currency may find some relief from some trade deregulation crowded.
“People have been bearish on the dollar now for at least six or nine months,” said Minh Trang, a senior FX trader at Silicon Valley Bank in Santa Clara, California.
“Of course, you have to take a few breaths now and then.”
Bitcoin marked a new high of $ 37,386 on Thursday, extending an increase of more than 800% since mid-March.
It eventually traded at $ 37,382.
Reciting with Kevin Buckland; Additional commentary by Chuck Mikolajczak; Edited by Sam Holmes