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U.S. Dollar Falls As Democrats Regain House Control In Midterm Elections


The U.S. dollar lost ground against its key counterparts in the European session on Wednesday, as the Democratic Party regained control of the U.S. House of Representatives in the midterm elections, giving a blow to Trump and the Republican party.

Democrats secured 218 seats they needed to take control of the lower chamber of Congress.

Republicans retained control of the Senate, as they won seats in Texas, Indiana and Tennessee after 2016 election upset.

Although the results offered no surprises, investors fear that the political gridlock in Washington could clamp down Trump's business-friendly agenda.

U.S. treasury yields fell following the news, with the yield on 10-year U.S. Treasuries falling 3.19 percent, while that of 2-year equivalent was lower by 2.92 percent. Yields move inversely to bond prices.

Traders await the Federal Reserve's monetary policy announcement due on Thursday, with many expecting the Fed to leave interest rates unchanged.

All eyes are on the accompanying statement for clues about an expected rate hike in December.

The currency has been trading lower against its major opponents in the Asian session.

The greenback slid to 0.9953 against the franc, its lowest since October 24, and marked a 1.0 percent drop from a high of 1.0051 touched at 9:15 pm ET. The pair had ended Tuesday's trading at 1.0025. The greenback is poised to find support around the 0.97 level.

After rising to 1.3074 against the pound at 8:15 pm ET, the greenback resumed its decline and touched a 3-week low of 1.3175. At Tuesday's close, the pair was valued at 1.3098. Next key support for the greenback is seen around the 1.335 region.

Survey data from IHS Markit and Lloyds Banking Group unit Halifax showed that U.K. house price inflation eased sharply in October to its lowest level since March 2013.

The Halifax house price index rose 1.5 percent year-on-year in the three months to October, which was sharply slower than the 2.5 percent increase in September. Economists had forecast a 1.3 percent climb.

The greenback was 0.9 percent lower against the euro, sliding to more than a 2-week low of 1.1500. This follows a high of 1.1395 seen at 9:00 pm ET. The greenback was quoted at 1.1426 per euro when it closed deals yesterday. Continuation of the greenback's downtrend may take it to a support around the 1.16 area.

Preliminary figures from the Federal Statistical Office showed that Germany's industrial production rose for a second straight month in September, as against expectations for a modest decline.

Production grew a calendar and seasonally adjusted 0.2 percent. Economists had forecast a 0.1 percent decline.

Following more than a 4-week high of 113.82 set at 9:15 pm ET, the greenback changed its course against the yen and declined to a 5-day low of 112.95. The greenback-yen pair had finished yesterday's deals at 113.41. Further downtrend may see the greenback challenging support around the 110.00 level.

Preliminary data from the Cabinet Office showed that Japan's leading index eased in September after climbing in the previous month.

The composite leading index dropped to 103.9 from 104.5 in August. The reading matched economists' expectations.

The greenback weakened to a 2-day low of 1.3074 against the loonie, after rising to a 6-day high of 1.3159 at 9:15 pm ET. On the downside, 1.29 is possibly seen as the next support level for the greenback.

The greenback dropped to a 1-1/2-month low of 0.7300 against the aussie and more than a 3-month low of 0.6789 against the kiwi, reversing from its early highs of 0.7213 and 0.6712, respectively. The greenback is likely to challenge support around 0.74 against the aussie and 0.69 against the kiwi, if it drops further.

In today's events, Swiss National Bank Governing Board Member Fritz Zurbrugg gives a speech titled "Financial Stability: Old and New Challenges" at the Swiss Finance Institute in Zurich at 9:00 am ET.

At 10:00 am ET, Canada Ivey PMI for October is due.

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