The dollar flirted with three-week lows on Tuesday as investors stuck to hopes that there will be large U.S. fiscal stimulus after the Nov. 3 election to shore up a pandemic-hit economy, supporting riskier currencies.
“It seems there is a strong optimism that eventually there will be stimulus. It is hard to argue against fiscal expansion given the coronavirus epidemic is almost like a natural disaster,” said Makoto Noji, chief currency and foreign bond strategist at SMBC Nikko Securities.
While markets are getting sceptical about the chances of having a bipartisan package before the election, a widening lead by Democratic presidential candidate Joe Biden over President Donald Trump is leading investors to expect big stimulus after the election. A Biden victory is also seen as negative for the dollar partly because his pledge to hike corporate tax would reduce returns from investments in the United States.
Thus the dollar also weakened against currencies that are deemed “safer” - those that tend to have small or inverse relations with risk sentiment - such as the yen and the Swiss franc.
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