MercoPress. South Atlantic News Agency

Markets react to the US midterms: the dollar falls and gold rises

The dollar index, which measures its value against a basket of currencies, remained in negative territory near 101.50

The US dollar weakened against major currencies on Wednesday morning and gold rose more than 2% to above US$4,000 an ounce as markets assessed the Democratic victory in the midterm elections, which will give the opposition control of both chambers of Congress for the final two years of Donald Trump’s presidency.

The dollar index, which measures its value against a basket of currencies, remained in negative territory near 101.50, and the yield on the benchmark 10-year US Treasury note fell below 4.95%, according to financial analysis platform FXStreet. Wall Street index futures were mixed. The dollar’s biggest fall was against the Swiss franc, at 0.4%. The euro briefly rose above US$1.1250, its highest in two weeks, before easing to 1.1230, and sterling extended its winning streak to a sixth day above US$1.3450, ahead of an expected Bank of England rate rise on Thursday.

Analysts at Germany’s Commerzbank warned that “US equities, and in particular the tech-heavy Nasdaq, are likely to come under pressure today”, and that because the dollar’s recent strength had benefited from equity-related capital inflows, “dollar weakness could consolidate somewhat further in the coming hours”. In the longer term, they said a more constructive political debate in the United States, “admittedly a very remote possibility”, could reduce the political risk premium priced into the dollar.

Trump told The Wall Street Journal that the Iran war was “partially to blame” for the Republican defeat and that he has no plans for personnel changes in his administration.