NEW YORK: The dollar dropped on Wednesday and was on pace for its biggest daily percentage decline in three weeks after a sweeping victory by Democrats in the US midterm elections, removing an uncertainty for the market as investors gauged potential regulatory changes.
Democrats seized control of both the Senate and House of Representatives on Tuesday, scoring sweeping victories in Republican strongholds for the first time in generations as tens of millions of voters delivered a scathing rebuke to President Donald Trump.
The outsized win removed an uncertainty for markets grappling with the repercussions of the Iran war and an AI boom that has bolstered growth and inflation, just as the world’s biggest economy’s debt load mounts.
The elections removed any concerns about the potential for contested results while locking in a divided government with a Republican president and Democratic-controlled Congress.
The dollar index, which measures the greenback against a basket of currencies, fell 0.32 percent to 101.51, on track for its biggest drop since October 15, with the euro up 0.38 percent at USD1.1236 after climbing to USD1.272, its highest since October 6.
Despite the political change, expectations for the Federal Reserve’s interest rate path remain largely intact. Markets are pricing in an 82.6 percent chance for a rate increase of at least 25 basis points from the Fed at its December meeting, according to CME FedWatch, up from 77.4 percent in the prior session.
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