The dollar slumped on Monday, November 21, after soaring 10 straight days as investors consolidated gains buoyed by the election of a new Republican president who is expected to adopt fiscal policies leading to interest rate leaps, Reuters reports.
The greenback’s weakness on Monday though benefited the euro, which rose from an 11-month low hit last Friday. Recent political developments have eased the uncertainty surrounding next year’s German and French elections.
Shaun Osborne, chief currency strategist at Scotiabank in Toronto, said the dollar’s slide was just a correction or, at the very least, a consolidation. He remained upbeat on the dollar’s medium-term outlook due to rising rates amid expectations of stronger U.S. growth.
In late trading, the dollar index was down 0.1 percent at 101.12 .DXY. Over the last 10 days, it has posted a nearly 5 percent gain, with investors betting U.S. President-elect Donald Trump’s increased fiscal spending would stoke inflation and propel interest rates higher.
That said, Scott Smith, director of hedging solutions at Cambridge Global Payments in Toronto noted that Fed Chair Janet Yellen in her testimony before Congress last week struck a cautious tone on the U.S. economy, with the Fed seemingly in no rush to factor in the likelihood of increased fiscal stimulus into their economic models.
Meanwhile, analysts said German Chancellor Angela Merkel’s announcement on Sunday that she will seek a fourth term, while not a surprise, is viewed as euro-positive. Merkel is seen as a defender of liberal democracy in the West as investors fretted about a wave of populism and anti-globalization sentiment in Europe.
The euro rose 0.2 percent to $1.0601 EUR= in late trading, after touching its weakest levels since December 2015 on Friday.
In France, former President Nicolas Sarkozy was ousted in a party primary from the election race over the weekend. This leaves ex-prime ministers Francois Fillon and Alain Juppe vying to become the center-right Republicans’ candidate for the May presidential election.
The winner is expected to face National Front leader Marine Le Pen, who opposes the European Union. Some analysts said Sarkozy’s defeat lessened Le Pen’s prospects of winning, easing investor fears about a breakup of the euro zone.
Against the yen, the dollar hit a six-month high of 111.36 yen JPY=, and was last up 0.3 percent at 111.24.
