* Graphic: World FX rates in 2020 https://tmsnrt.rs/2RBWI5E
By Saikat Chatterjee
LONDON, Oct 9 (Reuters) - The dollar fell to its lowest in
nearly three weeks on Friday and was headed for a second
straight week of losses as expectations grew that Joe Biden
would win the U.S. presidency and offer fiscal stimulus after
the elections.
Several Wall Street banks forecast a stimulus package no
matter which candidate wins, but say that a Biden presidency, if
Democrats also retake control of the Senate, would be likely to
result in a bigger one. UBS Asset Management, for example, is
assigning a 75% probability of a Biden win.
"Besides possibly losing the presidency, Republicans may
also lose control of the Senate as betting odds are giving
Democrats a near 70% chance of taking the Senate," Brown
Brothers Harriman strategists said.
Reuters/IPSOS polling this week put Biden, a Democrat,
narrowly ahead of Republican President Donald Trump in five key
states - Wisconsin, Pennsylvania, Michigan, Florida and
Arizona. Rising expectations of a Biden victory has had a calming
effect on market volatility and boosted appetite for currencies
that have been hurt by the trade war between Washington and
Beijing.
"There's been a noticeable decline in implied volatility
around the election date, which suggests that the market is
getting more confident of the outcome and that it's satisfied
with the likely result," said Marshall Gittler, head of
investment research at BDSwiss Group.
The dollar eased 0.3% against a basket of currencies =USD
at 93.30 and it is down 0.8% for the week. It fell by a similar
margin last week. The dollar reached a two month-high at 94.75
in late September.
The Chinese currency was the biggest beneficiary of the
rising hopes of a Biden win. The yuan posted its biggest daily
rise in more than four years, though the gains were partly
catching up after a long break.
A stronger-than-expected setting of the yuan's trading band
also signalled that policymakers in China don't mind its rise.
Biden's lead in the polls are driving bets on a steadier
Sino-U.S. relationship. CNY/
The yuan CNY=CFXS was last up 1.2% at 6.7112 per dollar in
onshore trade and up half a percent to 6.7024 per dollar
offshore CNH=D3 .
The risk-sensitive Australian dollar AUD=D3 rose 0.2% to
$0.7186, putting it a fraction higher for the week, despite
analysts interpreting a Tuesday central bank statement as a
signal of monetary easing to come. AUD/
The yuan's gains had little impact on the euro and the
pound, where concern over Brexit negotiations next week
dominated sentiment.
The euro EUR=EBS was up 0.1% to $1.1776. Sterling GBP=D3
crept 0.2% higher to $1.2961 and has held firm this week as
prospects for a Brexit deal appeared to improve.
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