Dollar Depreciation Continues as US Senate Hangs in Balance
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- Anticipation surrounds Georgia run-off elections
- Currency markets respond to current events
The US dollar has been sliding since the start of trading for 2021 amid increasing Covid infections along with the unfolding of the run-off elections in Georgia. Early on Wednesday, the greenback reached a new low against the Swiss franc, the Canadian dollar, and the Japanese yen. Across the board, market participants are not hesitating to offer the US dollar, seeing how the Georgia elections are playing out, and more importantly, the current Democratic leadership, which triggers fears of higher corporate taxes and stricter regulations for businesses.
The two run-off elections in Georgia, which are currently taking place, point to a win for Democrats as votes continue to be counted. In the first Georgia Senate race, Democratic challenger Raphael Warnock has announced as the winner against Republican candidate Kelly Loeffler on Wednesday morning. Mr. Warnock had 50.5% of the votes or a lead of over 55,000 votes.
The other run-off election between Democratic contender Jon Ossoff and his Republican rival David Perdue shows a lead for Mr. Ossoff by roughly 9,000 votes as over 4 million votes have been counted and many are expected to come later, a large portion of them from areas that are in favor of Democrats.
If both Democrats win seats in the Senate, it will give President-elect Joe Biden and his party control of the Senate along with the House of Representatives. This will make way for Mr. Biden to implement his plans and legislative agenda
Highs and Lows in the Currency Markets
In light of current events, the currency markets have been quick to digest the news. The EUR/USD is gaining more traction early Wednesday, beating the previous high of 1.2305, having already taken out a 33-month top at 1.2330, or the highest level since April 2018. The area around 1.2300 presented a challenge for Euro bulls as it was acting as the lid for the pair in the previous four trading days.
The USD/CHF pair reached a new low today going below 0.8770 for the first time since Jan 26, 2015. The exchange rate has been trading in a descending manner since April 2019 when it hit a top of 1.0239. The levels to which the pair dipped today were last seen in early 2015 when the Swiss National Bank stunned the market by lifting the cap of the Swiss franc against the Euro, essentially causing the franc to soar by roughly 30% against the US dollar.
The USD/CAD pair is also making new lows on Wednesday, going below 1.2660 with a low of 1.2646, prices not seen since April 2018. The USDCAD rate is in a heavy downtrend since the market turmoil in March last year when the exchange rate hit a high of 1.4667. Up to the present point, the pair has depreciated by roughly 14%.
The USD/JPY has also been in a well-defined bearish trend, also marking its high point around the time when the market was trading in its nadir in March, essentially uplifting the US dollar among its peers. In March, the USDJPY pair reached a high of 111.71 and is now trading at a new low around 102.50, a 10-month low, or a depreciation of over 8%.