US dollar up after indecisive Trump-Biden debate

London

THE US dollar ticked up in Europe on Wednesday, recovering some losses after a two-day fall, as traders weighed the implications of a bad-tempered first debate between US President Donald Trump and his challenger, Joe Biden.

The dollar index crept just above the 94 mark against a basket of currencies after two days of losses that followed the US currency reaching a two-month high last week.

The euro was down 0.3 per cent against the US dollar at US$1.1706.

Overall, the US dollar was set for its worst quarter since the spring of 2017 with a fall of about 3.3 per cent, as hopes for a swift recovery from the Covid-19 economic crash made investors exit safe havens and buy into riskier currencies.

Market action following the debate however, showed some nervousness, as uncertainty over the outcome of the US presidential election remains high after the chaotic encounter.

"The way the market narrative is playing at the moment is toward a Biden victory being somewhat negative for the (US) dollar, because of fiscal expansion taking place when the Fed is on hold and can tolerate higher inflation," said Stuart Ritson, a portfolio manager at Aviva Investors.

Many market participants were cautious about linking currency moves to the debate.

"I don't think that the USD recovery is related to the TV debate, which has, if anything, increased US political risks and should weigh on the USD," said Thu Lan Nguyen, a foreign exchange strategist at Commerzbank.

"Instead, we are seeing a natural pullback after the sharp depreciation in the last two days, which I think is natural", she said.

Economic indicators have recently painted an uneven picture of the economic recovery in Europe, but Wednesday's data was generally positive.

European Central Bank (ECB) president Christine Lagarde grabbed investors' attention as she set the scene for aligning the ECB's strategy with that of the Federal Reserve, possibly including a commitment to let inflation overshoot after it has been low for too long.

China's yuan held steady even after twin surveys showed strong factory activity, backing recent signs of a rebound in broad sectors of the world's second-biggest economy.

The offshore yuan steadied at 6.8111 per US dollar.

Against the yen, the US dollar was stable at 105.64 yen, below a two-week high of 105.74 overnight. REUTERS