FOREX-Dollar set for second week of losses on Biden win bets; yuan gains

* Graphic: World FX rates in 2020 https://tmsnrt.rs/2RBWI5E

By Saikat Chatterjee
LONDON, Oct 9 (Reuters) - The dollar edged lower on Friday
and was headed for a second consecutive week of losses as
investors increased bets Joe Biden would win the U.S. presidency
and offer fiscal stimulus after the elections.
Several Wall Street banks forecast some kind of stimulus
package no matter which candidate wins, but say a Biden
presidency, if Democrats also retake control of the U.S. Senate,
would be likely to result in a bigger one. UBS Asset Management,
for example, is assigning a 75% probability of a Biden win.
Reuters/IPSOS polling this week put Biden, a Democrat,
narrowly ahead of Republican President Donald Trump in five
states - Wisconsin, Pennsylvania, Michigan, Florida and Arizona
- that will play critical roles in deciding the
victor. Rising expectations of a Biden victory has had a calming
effect on market volatility around the U.S. election date and
boosted appetite for currencies which 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 0.1% against a basket of currencies
=USD at 93.47 and it is down 0.4% for the week. It fell 0.8%
last week. It 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 posting 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 .
"Polls are showing that Biden is taking the lead ... it
means the risks of resuming a new trade war are getting smaller,
so I think this is positive for the renminbi," said Ken Cheung,
chief Asian FX strategist at Mizuho Bank in Hong Kong.
The risk-sensitive Australian dollar AUD=D3 rose 0.2% to
$0.7186, putting put 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 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.