Bloomberg News

Dollar Declines Versus Major Counterparts as U.S. Goes to Polls

November 06, 2012

The dollar fell against the majority of its 16 most-traded peers as voters headed to the polls to decide whether President Barack Obama or challenger Mitt Romney will guide the world’s biggest economy for the next four years.

The U.S. currency touched an eight-week high earlier against the euro before the world learns which candidate will help shape policy ranging from the Federal Reserve chairmanship to the so-called fiscal cliff of more than $600 billion in tax increases and spending cuts set to take effect in 2013. Australia’s dollar gained against all but one of its major counterparts after the central bank unexpectedly refrained from cutting interest rates today.

“Even if we get an election result, the larger implication is what happens with the fiscal cliff,” Brian Kim, a currency strategist at Royal Bank of Scotland Group Plc’s RBS Securities Inc. in Stamford, Connecticut, said in telephone interview. “People are all watching because there is that small chance that we don’t know by the end of the night how things turn out, and that would mean increased uncertainty.”

The dollar fell 0.1 percent to $1.2814 per euro at 5 p.m. New York time after appreciating to $1.2764, the strongest level since Sept. 11. The U.S. currency rose 0.1 percent to 80.35 yen. The euro gained 0.2 percent to 102.97 yen.

The U.S. currency has gained 0.7 percent over the past month, according to Bloomberg Correlation-Weighted Indexes, which track 10 developed-nation currencies. The euro dropped 1.2 percent and the yen declined 1.6 percent.

Aussie, Naira

Australia’s currency rose to a five-week high against the dollar after Reserve Bank of Australia Governor Glenn Stevens and his board left the overnight cash-rate target at 3.25 percent. Twenty of 27 economists surveyed by Bloomberg forecast a cut to 3 percent.

“The RBA was expected to potentially cut rates today and they didn’t,” said Greg Gibbs, a senior currency strategist at Royal Bank of Scotland Group Plc in Singapore. “As a result, the Aussie dollar rallied.”

The so-called Aussie advanced 0.7 percent to $1.0435 after rising to $1.0448, the strongest since Sept. 28. The currency gained 0.8 percent to 83.85 yen, a five-month high.

Nigeria’s naira snapped two days of declines against the dollar as Barclays Plc said it will add the nation’s debt to its emerging-market local-currency government bond index from March 2013.

The currency of Africa’s biggest oil producer gained 0.3 percent to 156.925 a dollar. The naira has increased 3.4 percent this year, the second-best performer in Africa, according to data compiled by Bloomberg.

Presidential Election

A national poll conducted by the Pew Research Center Oct. 31-Nov. 3 showed Obama leading Republican challenger Romney, 48 percent to 45 percent. The survey showed them tied at 47 percent a week ago. The final tracking poll by ABC News and the Washington Post had the Democratic incumbent taking a lead of 50 percent to 47 percent in a survey of 2,345 likely voters conducted Nov. 1-4.

After an initial boost, the U.S. currency would likely decline against most of its counterparts except for the yen as investors’ willingness to take risk increased with a Romney victory, Alan Ruskin, global head of Group-of-10 foreign- exchange strategy at Deutsche Bank AG in New York, wrote Oct. 23 in a note.

The greenback would probably weaken with an Obama win amid politicians’ handling of the so-called fiscal cliff before leveling out on restrained risk-taking, he wrote.

Yield Search

Romney has said he disagrees with the Fed’s measures to stimulate the economy and would replace Chairman Ben S. Bernanke. A win by Obama would signal continued dovish central- bank policy, said Sebastien Galy, a senior foreign-exchange strategist based in New York at Societe Generale SA.

“It’s a low-yield environment,” Galy said. “That means the search for yield continues, and especially in places that are going to benefit from Fed easing. That would be, for example Mexico. That would be, to a lesser extent, Canada.”

The Dollar Index (DXY), which IntercontinentalExchange Inc. uses to track the U.S. currency against those of six major trading partners, fell 0.2 percent to 80.75 after gaining during the previous four days.

The euro fell against higher-yielding counterparts as Greek Prime Minister Antonis Samaras struggled to get the members of three-party coalition to support a package of further austerity measures, which will be voted on as soon as tomorrow.

Spain, Germany

“All this uncertainty that continues to linger is proving to be quite damaging for the euro,” said Sonja Marten, a currency strategist at DZ Bank AG in Frankfurt. “It’s difficult to see how we can get out of this quickly.”

Spain said yesterday it is working on a review of income and spending in its welfare system as it heads toward a deficit. The country is relying on European aid for its banks and potentially seeking more to shore up its public finances.

German factory orders fell the most in a year in September, the Economy Ministry in Berlin said today. Orders, adjusted for seasonal swings and inflation, slumped 3.3 percent from August, when they dropped a revised 0.8 percent.

“The euro is being sold as the market focuses on the risks surrounding Greece and Spain,” said Junichi Ishikawa, an analyst at IG Markets Securities Ltd. in Tokyo. “German data have been weakening and there are concerns the country may fall into a recession. You can’t buy the euro in the current environment.”

Europe’s currency is likely to extend its 1.3 percent drop in the past three sessions against the U.S. dollar this week, according to IG Markets Securities Ltd., which cited trading patterns.

To contact the reporter on this story: John Detrixhe in New York at jdetrixhe1@bloomberg.net

To contact the editor responsible for this story: Dave Liedtka at dliedtka@bloomberg.net


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