Dollar drifts on Mideast, midterm risks; Aussie and yuan dip
SPY•The dollar eased as investors weighed US-Iran tensions and US midterm elections, while the Australian dollar and yuan fell after domestic policy moves. The Reserve Bank of Australia raised its cash rate by 25 basis points to 4.85%, and China raised foreign-currency reserve requirements.
1. Dollar eases
The dollar eased on Tuesday as investors weighed uncertainty over US-Iran tensions and US midterm elections. The euro rose 0.14% to $1.1201, the pound gained 0.1% to $1.3421, and the yen strengthened slightly to 157.8 per dollar. Polls and non-partisan analysts suggested Democrats could retake the House, while control of the Senate remained uncertain.
2. Currencies react to policy
The yuan weakened after China’s central bank raised the amount of foreign currency financial institutions must hold as reserves, a move traders and analysts saw as an attempt to slow the currency’s recent gains. The dollar rose 0.37% against both the onshore and offshore yuan to 6.672. The Australian dollar fell 0.5% to $0.6963 after the Reserve Bank of Australia raised its cash rate by 25 basis points to 4.85%, as expected; a 6-3 vote raised doubts about further increases.
3. Swiss franc strengthens
The Swiss franc strengthened after annual inflation accelerated to its highest level in nearly three years in October, driven by higher petrol prices. The dollar fell 0.3% to 0.8164 francs, while the euro slipped 0.2% to 0.9137 francs, its lowest level against the franc since June. Diplomatic efforts to prevent renewed escalation in the Gulf after the US elections had pushed oil prices lower and weighed on the dollar in recent days, though a senior Iranian official said Iran and the US were far from a deal to end the war.
