Dollar drops sharply on Democrats' early gains in US midterm election
SPY•The dollar fell against major currencies as early US midterm results showed Democrats making gains, while investors sold stocks and sought Treasuries. The euro rose 0.5% to $1.1249, the yen gained 0.7% to 157.63 per dollar and the dollar index fell 0.3% to 101.4.
1. Dollar weakens
The dollar fell sharply against major currencies on Wednesday as early results from the US midterm elections showed Democrats making strong gains in their effort to take control of Congress. Investors sold stocks, moved out of the dollar and sought safety in Treasuries. The euro rose 0.5% to $1.1249, the yen strengthened 0.7% to 157.63 per dollar, and the dollar index fell 0.3% to 101.4.
2. Election and market risks
Democrats Annie Andrews and Roy Cooper won Senate races in South Carolina and North Carolina, giving the party two of the four seats it needs to gain control of the chamber. Currency strategist Carol Kong said the dollar could fall further if Democrats sweep Congress, which she said would limit government spending over President Donald Trump's term. She also said investors were watching the risk of an escalation in the Middle East.
3. AI and other currencies
Moh Siong Sim said the dollar's price action was consistent with concerns about greater scrutiny of AI under a Democratic sweep and worries about US growth if AI faces greater regulation. He also said passing federal legislation would remain difficult given the high hurdle and Trump's veto power. Sterling rose 0.4% to $1.3460, while the dollar weakened 0.9% against the Swiss franc to 0.8133; the offshore yuan eased 0.1% to 6.6782 per dollar.
