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Greenback Down As Obama's Re-election Undermines Dollar Sentiment

Greenback Down As Obama's Re-election Undermines Dollar Sentiment
11/7/2012 1:41 AM ET

The US dollar edged lower against its major rivals in Asia on Wednesday on expectations that monetary policy will remain loose under Obama in his second term as President.

The re-election of Obama as president reinforced views that the U.S. will persist with the monetary policy of low interest rate and quantitative easing, which are considered negative for the U.S. currency.

Obama faces a number of economic challenges in his second four-year term, including the tackling of $1 trillion in annual deficit, reducing $16 trillion in national debt and taking important steps to improve economic growth.

Uncertainty about the outcome of the presidential race between Obama and his Republican challenger Mitt Romney increased risk-aversion in the morning, which was dollar supportive due to its safe-haven status.

The dollar re-visited the key 0.94 level against the Swiss franc after a gap of 5-days, falling as low as 0.9391 amid the poll outcome. The dollar recovery against the franc in the past week was stalled under 0.9460 yesterday and the local currency has lost almost 0.7 percent since then.

The US dollar also edged lower against the euro, falling to a 5-day low of 1.2876. The dollar fell short of breaking above a key resistance level against the euro yesterday and has depreciated 0.86 percent since then. Further selling could lead the dollar to re-test the pivotal 1.29 level in the near-term.

Against the pound, the greenback slipped to a 2-day low of 1.6039 and this may be compared to yesterday's closing value of 1.60. Further buying could help the GBP/USD pair extend its advance towards the next resistance zone at 1.6090/1.62.

Shop price inflation in the UK accelerated to 1.5 percent in October from 1 percent in September, the British Retail Consortium, or BRC, said in a report today.

Food inflation increased to 4 percent from 3.1 percent in September. Non-food prices were broadly flat during the month following a 0.2 percent fall in the previous month.

"Wet summer and higher feed costs are affecting vegetables and meat and poor supplies on world markets are making the ingredients for some manufactured foods more expensive," the BRC Director-General Stephen Robertson said.

On the flip-side, the U.S. dollar bounced back from a 6-day low of 79.82 against the yen post the Obama re-election, rising as much as 80.18. If the dollar extends its advance, 80.50 is seen as the next likely resistance level.

Looking ahead, German industrial production for September and wholesale price index for October, eurozone retail sales for September and the Swiss consumer price index for October are expected in the European session.

The U.S. consumer credit and the weekly crude oil inventories are the key data to watch in the North American session.

by RTT Staff Writer

For comments and feedback: editorial@rttnews.com

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