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Dollar Tumbles Before Fed as Race for the White House Tightens – Bloomberg

HomeNewsDollar Tumbles Before Fed as Race for the White House Tightens – Bloomberg
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02
Nov
Dollar Tumbles Before Fed as Race for the White House Tightens – Bloomberg
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The dollar fell against its major peers before the Federal Reserve’s interest-rate decision and as the U.S. presidential race tightens in the run-up to next week’s vote.

The U.S. currency slid for a second day against the yen on speculation Fed policy makers will emphasize that the path of future interest-rate increases will be gradual, even as they keep open the door to a December rate hike. An ABC News/Washington Post tracking poll showed Republican candidate Donald Trump ahead of Hillary Clinton for the first time since May, leading to gains in haven currencies and a drop in Mexico’s peso.

“It’s been positioning around the election,” said Peter Dragicevich, a foreign-exchange strategist at Commonwealth Bank of Australia in London. “There’s some chance the Fed could surprise with a change in language.”

The Bloomberg Dollar Spot Index, which tracks the currency against 10 major peers, fell 0.2 percent as of 7:30 a.m. in New York. It jumped 2.2 percent last month, the biggest increase since May, as signs of economic strength pushed Treasury yields higher in anticipation of tighter monetary policy.

The dollar depreciated 0.7 percent to 103.38 yen, after reaching the weakest level since Oct. 20. It slipped 0.4 percent to 97.14 Swiss centimes, having tumbled 1.4 percent Tuesday, the steepest decline since June 3.

The Federal Bureau of Investigation’s reopening of an inquiry into Clinton’s use of private e-mail servers has revived the campaign of Trump, who has promised to scrap existing U.S. trade agreements. Trump is viewed less favorably by investors in part because of a lack of policy clarity and what’s perceived to be greater unpredictability than his rival. A four-way Bloomberg poll of independents on Wednesday showed Clinton ahead in a four-way race with less than a week to go before the presidential vote.

Concerns over the election are outweighing positive U.S. economic data, according to Ray Attrill, the global head of foreign exchange at National Australia Bank Ltd. in Sydney.

The ISM manufacturing index released Tuesday showed activity last month beat the median estimate in a Bloomberg survey of economists. The data followed a report last week that showed the U.S. economy grew an annualized 2.9 percent in the third quarter, the most in two years.

The market-based probability of a Fed hike by the end of December is 68 percent, compared with 73 percent a week ago. Officials will keep policy steady Wednesday, according to economists surveyed by Bloomberg.

“Politics has once again triumphed over economics, judging from overnight market price action,” Attrill wrote in a note to clients. “A slightly better-than-expected U.S. manufacturing print” would “ordinarily have bolstered market confidence that the unfolding economic calendar is not going to derail expectations for the Fed moving on rates next month,” he wrote.

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