Dollar drops as stocks surge, Fed meeting in focus

The U.S. dollar fell to two-week low against a basket of currencies and a seven-month low against the Japanese yen as surging stock markets reduced demand for the greenback, and before the Federal Reserve will conclude its two-day meeting.

Democrat Joe Biden edged closer to victory over Republican President Donald Trump in the U.S. presidential race as election officials tallied votes in the handful of states that will determine the outcome and protesters took to the streets. But the so called “blue wave,” where Democrats also take control of the Senate in congressional elections, looked unlikely. Wall Street’s main indexes jumped as investors bet that a Republican-held Senate would block any moves by a Biden administration to tighten regulation and raise taxes on corporate America.

The dollar index fell 0.74% against a basket of currencies to 92.71. The euro jumped 0.78% to $1.1813. The dollar dropped 0.78% against the Japanese yen to 103.67 yen, the lowest since March 12, and breached technical support at 104 yen that will now likely form resistance.

The yuan gained to a more than two-year high of 6.5994. The Chinese currency has been heavily affected by Sino-U.S. disputes since the outbreak of a bilateral trade war in 2018.

The dollar has been hurt by ultra-loose Federal Reserve policy as the U.S. central bank aims to stimulate growth after the economy was ravaged by business shutdowns due to COVID-19.

The U.S. central bank’s policy-setting Federal Open Market Committee is expected to stick closely to its last statement and repeat its pledge to do whatever it can to help the economy through the coronavirus-triggered recession when it concludes its meeting on Thursday. U.S. Treasury yields fell from four-month highs this week as the prospect of a large jump in stimulus on a Democrat sweep of Congress faded, which is also expected to weigh on the dollar.

Dollar drops as stocks surge, Fed meeting in focus, Reuters, Nov 5