Election results don’t make waves in currency markets
SAN FRANCISCO (MarketWatch) — The U.S. dollar reversed higher against the euro Wednesday as equities made a dispirited start to the day, with traders keenly awaiting the Federal Reserve’s policy decision expected later in the session
Results in the U.S. midterm elections so far appeared to have had little immediate impact on the major currency pairs, with Republicans taking control of the House of Representatives as expected. Read latest on Republicans taking control of the House.
The dollar index (DXY 76.88, +0.16, +0.20%) rose to 76.924, up from a session low of 76.573 and from 76.719 in late North American trade Tuesday. The index tracks the greenback against a basket of six major currencies.
The euro (EURUSD 1.4010, -0.0026, -0.1852%) , which had turned higher during European trading hours, reversed lower as the U.S. trading day got into full swing. The shared currency bought $1.4027, down from a session high of $1.4059 and from $1.4036 late Tuesday. The dollar had fallen slightly against the European currency during Tuesday trading. See previous Currencies column.
Giving the U.S. dollar some safe-haven support, U.S. stocks made a weak advance after results of midterm elections came in largely as expected. The Dow Jones Industrial Average (DJIA 11,184, -5.11, -0.05%) rose 19 points at the open, but were lately trading down 12 points. Read more on U.S. stocks in Market Snapshot.
The day’s economic data also could be viewed as dollar-supportive, said one analyst. Private-payrolls provider ADP said private employers added 43,000 jobs in October, more than expected, while the Institute for Supply Management said its services-sector index rose to 54.3%, also topping forecasts. See full story on ISM services.
“The batch of positive economic developments may continue to foster a bullish sentiment towards the U.S. dollar throughout the North American trade,” said David Song, currency strategist at DailyFX.com.
The pound (GBPUSD 1.6070, +0.0028, +0.1745%) posted gains against the greenback, rising to $1.6077 from $1.6025. The dollar added to gains against the Japanese yen (USDYEN 81.3900, +0.7500, +0.9301%) , rising to ¥81.38 from ¥80.70 late Tuesday.
The Australian dollar (AUDUSD 0.9953, -0.0038, -0.3803%) retreated from the record-high $1.0023 hit the previous day to trade at 99.50 U.S. cents, little changed on the day.
At 2:15 p.m. Eastern time, the Federal Open Market Committee will end its two-day policy meeting with a statement that is widely expected to include the announcement of a new large-scale asset-purchase program.
Estimates for how much in Treasury bonds the central bank will buy have ranged as high as $2 trillion. Many analysts now expect the Fed to announced something more along the lines of $100 billion a month for the next several months, saying it will reassess the need for purchases as the economic data evolve.
The dollar’s reaction will depend “on the qualitative nature of the statement and whether it is seen as paving the way for further [quantitative easing] if needed,” which would be negative for the dollar, according to currency strategists at RBC Capital Markets.
If the Fed’s statement is interpreted as meaning the first amount announced may be the end of it, that could help the dollar stabilize or strengthen, they wrote in a note.
