FOREX-Dollar slumps to 2-month low, investors see more declines

* Dollar falls broadly, equities rally
* Currencies price in low chance of big U.S. stimulus
* Australian dollar falls after RBA statement
* Graphic: World FX rates in 2020 https://tmsnrt.rs/2RBWI5E

By Ritvik Carvalho
LONDON, Nov 6 (Reuters) - The dollar sank to its lowest
level in over two months against a basket of peer currencies on
Friday, as vote counting for the contentious U.S. election
dragged on and investors predicted more losses for the currency.
Investors are betting that Democrat Joe Biden will become
the next president but Republicans will retain control of the
Senate, which will make it difficult for the Democrats to pass
the larger fiscal spending package they have been pushing.
Biden maintains an edge over President Donald Trump, but a
few important states are still counting votes and Trump is
mounting legal challenges to vote counts, so there is still a
high degree of uncertainty. The dollar index =USD fell against a basket of six major
currencies to 92.274, hitting its lowest level since September
2.
For the week, the dollar index was down 1.6%, on course for
its biggest drop in almost four months.
A large decline in long-term Treasury yields due to
expectations for less fiscal spending, combined with a rally in
equities and other riskier assets, has placed the dollar under
consistent selling pressure that is likely to continue.
"So far investors have been prepared to overlook the threat
of a contested election, presumably seeing Donald Trump's legal
initiatives as ‘frivolous' and these benign conditions have
generated a broad-based dollar decline," said strategists at
ING.
"The fact that dollar/yen (which never moves) is trading at
103.50, tells us that there is a broader dollar move afoot than
a mere risk rally."
The dollar fell further against the Japanese yen, trading at
103.23 yen JPY=D3 on Friday, close to an eight-month low.
Japanese Prime Minister Yoshihide Suga has vowed to work
closely with overseas authorities to keep currency moves stable,
because a strong yen is widely viewed as a threat to Japan's
economy. Against a buoyant euro EUR=EBS , the dollar traded at
$1.1874 after falling 0.87% in the previous session.
The single currency has risen sharply this week on the
dollar's weakness, but has also benefited from news of the
European Union inching closer to a budget deal.
The British pound GBP=D3 traded at $1.3128, 0.2% lower on
the day after a hefty 1.23% gain on Thursday.
Voting tallies from several U.S. states continued to trickle
in during Asian trading hours, but currencies showed little
reaction because the declaration of an outright winner could
take several more days or even weeks, some traders said.
Investors were also awaiting the release of U.S. non-farm
payrolls later on Friday, forecast to show a slight slowdown in
job creation.
Worries about the U.S. economy are growing, which is a
reason to expect declines in the dollar to continue into next
year, some analysts say. The rise in new coronavirus cases to
record levels in several states could also curb economic
activity. ING also added that the dollar sell-off may have a little
more mileage today if Biden formally secures 270 electoral
college votes or if a softer-than-expected October payrolls
report suggests that the Fed will have to throw more liquidity
at the market.
The onshore yuan CNY=CFXS fell to 6.6386 per dollar but
still remained close to its more than two-year high reached on
Thursday.
Many investors expect a Biden administration will slightly
scale back Trump's trade war with China, which should benefit
the yuan.
Elsewhere, the Australian dollar AUD=D3 fell against the
greenback after the country's central bank said it is prepared
to expand bond purchases if needed to support the economy.


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