As Americans were voting their next president, the dollar dropped dramatically on Tuesday. At this point, the result of the contest between Democrat Joe Biden, who led the polls-and Republican Donald Trump, who firmly believes in his re-election, remained unclear. However victory will depend on the outcome in a few key states, including Florida, North Carolina, Ohio, and Texas, where the competition is tight.
On Tuesday night, the dollar index (which tests its evolution against a basket of 6 currencies) gave up 0.6% to 93.58 points, while the euro recovered 0.56% to $1.1705, after a decrease of almost 2% in 7 sessions. The dollar gave up 1.04 percent against the euro to $1.1721/EUR earlier in the day, and fell 1.05 percent against the sterling pound to $1.3052/GBP.
While in recent days, the greenback had acted as a safe haven in the face of confusion about the U.S. presidential election, but on Tuesday it went in the opposite direction, even though the election results are still far from decision.
It also seemed that investors were betting on an unambiguous and swift election result that promoted risk-taking in stock markets, penalizing the dollar, the yen and government bonds. Prices dropped on Tuesday night, driving interest rates up, with the 10-year T-Bond yield recovering 5 basis points to 0.90 percent, the highest since June last year.
Gold profits from the prospect of a disputed verdict.
On the other hand, for the past 3 sessions, highlighting the anxiety in the markets, gold has been attracting buyers. For the Comex December futures contract, the yellow metal finished Tuesday up 1 percent at $1,910.40 an ounce. Gold has benefited from the dollar’s fall, which made sales of gold less costly for foreign investors.
In the coming days, financial and commodity markets will also experience ups and downs if the U.S. election leads to a result that is too closer and leads to protests.
Donald Trump has already made it clear that if he loses, he will challenge the election result. He challenged the integrity of the postal ballot system that, against the backdrop of the Covid-19 pandemic, was commonly used by voters. In the event of protest, analysts fear social tensions, even violence in the region, between supporters of both sides.