* Graphic: World FX rates in 2020 https://tmsnrt.rs/2RBWI5E
By Saikat Chatterjee
LONDON, Nov 5 (Reuters) - The dollar's losses deepened on
Thursday, setting it on course for its biggest three-day losing
streak in more than three months as traders braced for the
outcome of a U.S. central bank policy meeting that might hint at
more stimulus.
Traders also unwound some of their safe-haven demand for the
greenback as Democrat Joe Biden moved closer to victory in the
U.S. presidential race with election officials tallying votes in
the handful of states that will determine the outcome.
But his party is falling short of expectations in
Congressional elections, with the Senate looking increasingly
likely to stay in Republican hands, making it hard to implement
a big stimulus package.
Financial markets were braced for days or even weeks of
uncertainty as incumbent President Donald Trump has opened a
multi-pronged attack on vote counts in several states by
pursuing lawsuits and a recount which is also widely seen as
dollar negative.
"The Fed today is a bit of a sideshow but there is a chance
it may strengthen forward guidance around potential quantitative
easing and that would be dollar negative as you may also have
less stimulus," said Justin Onuekwusi, portfolio manager at
LGIM.
Against a basket of its rivals =USD , the dollar fell 0.5%
to 92.93, its lowest level in more than a week. On a cumulative
basis, the greenback has weakened 1.2%, its biggest three-day
fall since late July, according to Refinitiv data.
The dollar's weakness was also compounded by a broad-based
decline in U.S. Treasury yields with spreads between benchmark
10- and 2-year maturity debt tightening to its narrowest levels
in more than three weeks. US/
With the final result of U.S. elections still uncertain, the
Fed is expected to stick closely to its last statement and
repeat its pledge to do whatever it can to help the economy
through the coronavirus-triggered recession. The decision is due
at 1900 GMT.
"The dollar will probably be caught between a haven bid on
the uncertainty of the disputed election and a lack of interest
in shorting the currency on the prospects of a potential Biden
win," said John Velis, an FX and macro strategist at BNY Mellon.
Some of the biggest gains were seen in currencies which had
borne the brunt of Trump's protectionist policies in recent
years, with the Chinese yuan briefly rising to a more than
two-year high versus the greenback.
The euro EUR=EBS hopped above the $1.18 mark, up 0.6% from
the previous session as some investors bet on a Biden victory.
"The euro was flying around in the last couple of days, to
and fro, but in the end it does seem like the euro tends to be
stronger under a Biden scenario," said John Vail, chief global
strategist at Nikko Asset Management.
The British pound broke above $1.30 after the central bank
ramped up its bond purchase plan. Elsewhere, the Norwegian crown gained more than 1% versus
the dollar after the central bank said it would maintain its
accommodating policy until the economy shows clear signs of
revival from the coronavirus pandemic.
Broader currency market volatility gauges declined with a
widely-watched index falling to more than three-month lows
.DBCVIX .
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