Investors began to wager on a Biden presidency and a big U.S. stimulus which contributed to the largest weekly drop of the dollar against the Yen and a poor week against the Euro.
The DXY slightly moved mostly in the dollar’s favor in the Asia sessions as traders awaited the final U.S. Presidential debate.
Markets could be sensitive to any vote-shifting moments as campaigning hits fever pitch of polling day on Nov. 3.
No matter who gets elected, persistent hopes of a stimulus package before the election and confidence that spending will follow will continue either way.
The prospect of a stimulus has supported investor’s mood and made them look upon riskier currencies instead. This has likely boosted the safe-haven Japanese yen.
“If we do get through and Biden wins and he pushes on with stimulus, then we’re back in to a negative U.S. dollar, risk-on, positive for Aussie and kiwi kind of story,” said Westpac currency analyst Imre Speizer.
“But for now, there’s still a bit of a political risk overhang,” he said.
Analysts said the debate may not move markets immediately, but that political uncertainty over the election meant for a risky environment.
“There may be verbal fireworks but we expect no material impact on the dollar,” said Commonwealth Bank of Australia currency analyst Kim Mundy.
“We continue to see a high risk that the election outcome is delayed or contested,” she said, adding to near-term downside risks for the Australian dollar.
In the daily charts of GBP/USD, the sterling was down against the dollar Friday morning in Sydney session.
Sterling slipped overnight on uncertainty over Brexit outlook, but it is up 1.2% this week and is clinging on above $1.30 thanks to hopes that Britain and the European Union can reach a trade deal before a transition period ends on Dec. 31.
British, European and U.S. Purchasing Managers’ Index figures are due later on Friday may shift the mood of the pair. It is best to proceed with pre-caution for this pair today or staying in the sidelines may be the best strategy to use for this pair’s trading day.
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