Home World News Dollar Falls Slightly As Biden Ends Re-election Bid, Drops Vs Yen

Dollar Falls Slightly As Biden Ends Re-election Bid, Drops Vs Yen

The dollar has eased slightly against a basket of currencies while dropping versus the yen.

At the same time, investors are focussing on U.S. President Joe Bidenโ€™s decision to end his re-election campaign and the next moves by the Federal Reserve and the Bank of Japan.

Biden announced he was exiting the race on Sunday, and endorsed Vice President Kamala Harris to replace him as the Democratic candidate in the November election.

Harris quickly received the backing of many within the party, but several high profile names stayed quiet, including former House of Representatives Speaker Nancy Pelosi.

Former President Trump, the Republican nominee, sits well ahead in betting markets.

The dollar index =USD โ€“ a measure of its value relative to a basket of foreign currencies โ€“ fell 0.1% at 104.30.

โ€œThere is a growing consensus that the dollar will be stronger if Trump wins due to tax cuts and tariffs, but it is more complicated than that as Trump doesnโ€™t want a strong dollar,โ€ said Athanasios Vamvakidis, head of global forex research at BofA.

โ€œWhat happened in the last few weeks taught us we shouldnโ€™t expect the dollar to react to election developments unless the candidates make specific reference to the U.S. currency,โ€ he added. โ€œI expect the market to continue trading on the back of the data and central banks.โ€

Some analysts argued it was too early to assess the impact of Bidenโ€™s move as markets await election polls in the next few days and weeks. They are confident that but the dollar will remain strong no matter who wins the presidential elections.

โ€œFor this (verbal jawboning to weaken the dollar) to be effective it has to be accompanied by financial market intervention that is very large, capital controls that would be exceptionally costly or the erosion of Fed independence,โ€ said George Saravelos, global head of forex at Deutsche Bank.

โ€œWe conclude that tariffs and their associated stronger implications for the USD are significantly more likely to be the dominant market outcome compared to the alternative of a major shift in dollar policy,โ€ he added.

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Some analysts argued the Japanese currency could be at a turning point after falling since the beginning of 2024 as the Fed is close to cutting rates and the BoJ is widely expected to tighten its monetary policy soon.

The Federal Reserve Open Market Committee will meet on July 30, a day before the Bank of Japan.

Lee Hardman, senior currency analyst at MUFG, said the yen has been supported by โ€œmore compelling evidence of slowing U.S. inflation.โ€

The greenback dropped 0.6% versus the Japanese currency at 156.58. JPY=EBS

โ€œFrom now on, I expect the dollar to struggle to rise above 160 versus the yen, but I donโ€™t see a reversal of the current trend,โ€ BofA Vamvakidis argued.

The euro was up 0.05% at $1.088.

Analysts flagged that the ECB offered no concerted push back at last weekโ€™s policy meeting on the heavy pricing for a cut in September, which remains a strong base case.

The dollar strengthened 0.1% to 7.2943 yuan in offshore trading CNH=D3 after the Peopleโ€™s Bank of China unexpectedly cut the seven-day reverse repo rate to 1.7% from 1.8%, saying the move would improve open market operations and support the real economy. That was followed minutes later by surprise reductions to the one- and five-year loan prime rates.

The Australian dollar AUD=D3 sagged 0.30% to $0.6659, giving up earlier gains of about the same margin following news of Bidenโ€™s withdrawal.

(With Inputs From Reuters)