Tuesday November 4, 2008 - 13:27:15 GMT
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Reuters - www.reuters.com
FOREX NEWS-Dlr slips; investors await US election verdict
* Dollar index .DXY dips, yen in retreat
* Markets eye more global rate cuts, U.S. election outcome
* Obama in the lead, decisive outcome seen dollar positive
* Australian dollar bounces back after big RBA rate cut
(Adds comments, updates prices)
By Tamawa Kadoya
LONDON, Nov 4 (Reuters) - The dollar slipped broadly on
Tuesday as global stock markets took on a brighter complexion,
with investors anticipating aggressive interest rate cuts to
help stimulate flagging economies and the U.S. election outcome.
As Americans voted on Tuesday, Democrat Senator Barack Obama
was seen leading in the polls in 5 out of 8 key states.
Trade was overall subdued ahead of the verdict, but an Obama
victory, which is widely anticipated by the markets, was seen as
dollar positive due to expectations for further fiscal stimulus.
"We are seeing some euphoria around markets for an expected
Obama win," said Neil Mellor, currency strategist at Bank of New
But even a surprise win by Republican John McCain could be
supportive for the dollar, some said.
"In the broader picture, the fact that (President George W)
Bush, who has taken a benign neglect stance to the dollar, is
leaving will be taken as a dollar positive," said Derek
Halpenny, European head of global currency research for Bank of
Tokyo-Mitsubishi-UFJ in London.
But the dollar was on the defensive as European share prices
looked set to make a sixth straight day of gains, with extreme
risk aversion side-lined for now.
At 1255 GMT, the dollar index, which measures the U.S.
unit's value against a basket of currencies, was down 1.2
percent at 85.360 .DXY. The euro was up 1.5 percent against
the dollar at $1.2770 <EUR=> and up almost 2 percent at 127.23
The dollar was up 0.5 percent at 99.63 yen <JPY=>.
The Australian dollar <AUD=> bounced back from an early
tumble to $0.6597 after the Reserve Bank of Australia cut rates
by 75 basis points to 5.25 percent, more than the expected 50
Analysts said the euro was benefitting from the Aussie's
comeback, with the prospect of further large interest rate cuts
from the European Central Bank and Bank of England on Thursday
seen as stimulative to their respective economies.
"The current grim economic conditions could justify a cut of
any magnitude," said Calyon analysts wrote in a research note on
prospects for UK monetary easing.
WATCHING THE RACE
Obama was the winner in Dixville Notch, New Hampshire, the
tiny town that traditionally opens presidential voting right
after midnight. He gained 15 votes to McCain's six, becoming the
first Democrat to win there since Hubert Humphrey in 1968.
Trends in the race could become clearer soon after the first
polls begin to close at 6 p.m. EST (2300 GMT) in Indiana and
Kentucky on Tuesday. Voting ends over the next six hours in the
other 48 states.
Obama leads McCain in five of eight key battleground states,
according to a series of Reuters/Zogby polls released on Tuesday
Obama expanded his national lead to 11 points over McCain in
a separate Reuters/C-SPAN/Zogby tracing poll, up from 7 points
on Sunday. The telephone poll has a margin of error of 2.9
Democrats are also expected to expand their majorities in
both chambers of Congress. Combined with an Obama victory, that
would make it easier for his administration to push through
activist policies to boost markets.
But there was some risk of the Democrats holding too much
power, some analysts said.
"A landside Obama victory may raise the fear that Obama may
shift more to the left, prompting a dollar-negative reaction in
the short-term," BTM-UFJ's Halpenny said.
The ongoing global financial crisis and prospects of a
prolonged U.S. economic downturn have prompted both presidential
candidates to call for more fiscal spending.
"Given the situation, the options are limited," said Bank of
NY Mellon's Mellor. But that could also raise concerns about the
expanding U.S. budget deficit, others said.
(Additional reporting by Naomi Tajitsu; Editing by Victoria
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