On Thursday, the US Dollar Index (DXY) measured against a basket of six major currencies on an average, had been plunged to its lowest level in roughly three years as Democrats had seized controls of both chambers in the US Congress for the first time since 2009 following a landmark twin-triumph in US Senate elections in Georgia, cementing ways for a larger pandemic stimulus bill alongside a raft of ambitious reforms which the President-elect Joe Biden had fostered as part of his electoral agendas.
On top of that, in light of growing possibilities of further downswing of an American currency since a larger stimulus bill in effect would largely depreciate the greenback’s safe-haven appeal due to a rise in inflation indicators alongside a planned hike in Government spending, the original cryptocurrency, bitcoin, had marked a record high of $37,386 on early morning Asia-Pacific trading session, spanning a jubilant rally that had witnessed an upsurge of 800 per cent since mid-March.
Dollar drowns as Democrat-controlled Senate stokes hope of quicker recovery
Aside from that, the FX markets remained largely unresponsive to pro-Trump protests in the US capitol on Wednesday, but several analysts and economists were quoted saying that a Democratic-controlled Senate would be seen as a net positive for global economic growth alongside a majority of riskier assets, while the President-elect Joe Biden’s electoral agendas alongside promises of a larger stimulus package would likely to be negative for the American currency as a Biden Administration’s ambitious pledges would likely to widen up US trade deficits further while leading to a sharp uptick in US budget.
Citing statistics, in early Asia-Pacific trading session on Thursday, the American Dollar Index had been hovering closer to its three-year low at 89.32, however, the greenback had gobbled down steeper losses to hit a session low of 89.20, its lowest since the March of 2018.
Apart from that, the Australian Dollar, a closely monitored proxy for global growth, rose to its highest level in three years to 78.19 on Wednesday, while euro added 0.1 per cent to $1.2338 so far in the early Asia-Pacific trading, heading towards a three-year peak of $1.2349.
Meanwhile, citing that the US Dollar’s fortune set to be faltered further with Democrats leading both chambers in US Congress, a Chief Currency Strategist at Mizuho Securities in Tokyo, Masafumi Yamamoto said earlier in the day, “The dollar will remain weaker against commodity currencies like the Aussie and emerging market currencies.
At the same time, higher Treasury yields should benefit the dollar against the euro and the yen, because the dollar has under-priced the potential for U.S economic recovery under Biden. ”