The dollar fell in Asia on Monday as investors prepared for a possible shift in the world economy this week. This occured as the US selects a new leader and is expected to lower interest rates once more, which will have a significant impact on bond yields.
The dollar dropped 0.7% on the yen to 151.81 yen, while the euro increased 0.4% to $1.0884 but ran into resistance around $1.0905. The dollar index dropped to 103.79, down 0.1%.
In a 10-tick rally, Treasury futures partially recovered Friday’s losses. The victor, (The US in this case) may not be apparent for days after the election, as Republican Donald Trump and Democratic nominee Kamala Harris are still essentially tied in opinion polls.
The Predictions
While Harris was viewed as the continuity candidate, analysts predict that Trump’s immigration, tax, and tariff policies will push inflation, bond rates, and the dollar higher.
A reputable survey that showed Harris unexpectedly gaining a 3-point lead in Iowa, partly due to her appeal with female voters, may have contributed to the dollar’s early decline, dealers said.
A week ago, Harris was at 42 cents to 61 cents on a dollar, but now he is at 54 cents to Trump on 53 cents on a dollar, according to the betting website PredictIT.
JPMorgan’s Analysts said, “Since last week, Harris is seeing a boost in the polls, highlighted by the Selzer Poll of Iowa where some are using as a proxy for performance among the Blue Wall battleground states.”
25 BP is The Price
Markets believe the Fed will lower rates by a standard 25 basis points on Thursday instead of repeating its disproportionate half-point easing because of uncertainty surrounding the conclusion.
According to futures, there is an 83% possibility of a move of the same magnitude in December and a 99% chance of a quarter-point decrease to 4.50%-4.75%.
It is anticipated that the Bank of England will cut by 25 basis points during its meeting on Thursday, the Riksbank will ease by 50 basis points, and the Norges Bank will remain on hold.
On Tuesday, the Reserve Bank of Australia will hold the meeting, and it is anticipated that rates will remain unchanged.