Washington (TDI): The dollar slid on Monday as investors braced for a pivotal week in the global economy, with the US election looming and an expected interest rate cut from the Federal Reserve that could significantly impact bond yields.
The euro rose 0.5% to $1.0891, nearing resistance at $1.0905, while the dollar dropped 0.6% against the yen to 152.60.
The dollar index slipped slightly, down 0.1% to 103.80, as US Treasury yields fell by 5 basis points, partially reversing a sharp rise on Friday.
In a close race, Democratic candidate Kamala Harris and Republican Donald Trump are virtually tied in opinion polls, with the final outcome potentially taking days to confirm.
Analysts suggest that a Trump victory could boost inflation, bond yields, and the dollar, while Harris is perceived as a candidate for stability.
Also Read: US Elections: Key Facts You Need to Know
Currency market strategists attributed the dollar’s decline partly to a surprising poll showing Harris with a narrow 3-point lead in Iowa, attributed largely to strong support among female voters, according to Reuters.
Betting odds reflect the tight race, with Harris valued at 53 cents and Trump at 52 cents on PredictIt, compared to last week’s 45 cents to 59 cents, respectively.
Also Read: Joe Biden Discusses His Predictions for US Election
The uncertain election outcome has led markets to anticipate a modest rate cut from the Federal Reserve of 25 basis points on Thursday, as opposed to a larger half-point adjustment.
Traders have priced in a quarter-point reduction to a target range of 4.50%-4.75%, with an 83% chance of another similar cut in December.
