US Dollar Drops to Its Lowest Level in 10 Weeks

The dollar reached its lowest level in ten weeks on November 9 as investors heralded the election of Joe Biden as President of the United States by buying currencies exposed to trade thanks to expectations that a quieter administration in the White House will boost global trade and that monetary policy will remain soft.

The Chinese yuan settled at its peak of 28 months, the New Zealand dollar rose 0.6%, reaching its highest level in 19 months, and the Australian dollar recorded its highest level in seven weeks, while the dollar index fell to its lowest level since early September.

The pound reached its highest level in more than two months, while the euro rose 0.1%, continuing the gains of about 2% made last week, reaching its highest level in two months at $ 1.1895.

Biden crossed the 270 electoral threshold required for victory on Saturday by winning the crucial state of Pennsylvania. Republicans appear to have retained control of the Senate, although the final composition may not be clear until a run-off in Georgia in January.

The jubilant sentiment pushed stocks higher and the safe-haven Japanese yen fell slightly to 103.42 per dollar, just below an eight-month high it hit on Friday, when falling US Treasury yields deterred flows from Japan.

The Chinese yuan was also supported by strong Chinese trade data over the weekend, reaching 6.5758 per dollar. The Chinese currency is particularly vulnerable to the election result because of a belief that Biden will take a more lenient or more predictable stance toward China.

The South Korean won reached a 21-month high of 115.33 per dollar, and the Mexican peso rose 0.7% to 20.3980 per dollar, its highest level since March.

In emerging markets, the Turkish lira gained more than 2% following the ouster of the central bank governor and the resignation of the finance minister.

The lira has plunged 30% to record low levels this year in light of the Coronavirus pandemic, and at a time when investors are concerned about the decline in foreign exchange reserves and double-digit inflation.