Thread: Dollar Falls as Obama Win Paves Way for Monetary Easing

Dollar Falls as Obama Win Paves Way for Monetary Easing

By Monami Yui and Lucy Meakin - Nov 7, 2012 3:32 AM ET

45 Comments

The dollar weakened for a second day against the euro on speculation Barack Obama’s re-election as president will boost chances the U.S. will maintain monetary stimulus policies that tend to weaken the greenback.

The U.S. currency fell versus all except one of its 16 major counterparts after Obama defeated Republican challenger Mitt Romney, with the Associated Press projecting the president winning at least 303 electoral votes in yesterday’s election. He needed 270 for a victory. The Australian dollar rose for a third day as Asian and European stocks advanced, boosting demand for higher-yielding assets.

Dollar Is Near 8-Week High Against Euro Before U.S. Poll Results

Kiyoshi Ota/Bloomberg

The dollar traded at $1.2812 per euro as of 8:18 a.m. in Tokyo from $1.2814 at the close yesterday, when it reached $1.2764, the strongest since Sept. 11.




The dollar traded at $1.2812 per euro as of 8:18 a.m. in Tokyo from $1.2814 at the close yesterday, when it reached $1.2764, the strongest since Sept. 11. Photographer: Kiyoshi Ota/Bloomberg


2:21

Oct. 29 (Bloomberg) -- John Normand, head of global currency strategy at JPMorgan Chase & Co., talks about the outlook for the U.S. dollar. He speaks with Tom Keene and Sara Eisen on Bloomberg Television's "Surveillance." (Source: Bloomberg)


5:08

Nov. 1 (Bloomberg) -- Jane Foley, senior currency strategist at Rabobank International, talks about the outlook for the dollar, yen and pound. She speaks from London with Caroline Hyde on Bloomberg Television's "The Pulse." (Source: Bloomberg)




“Monetary policy will remain loose under Obama so the dollar will be sold,” said Michiyoshi Kato, senior vice president of foreign-currency sales at Mizuho Corporate Bank Ltd. in Tokyo. “Dollar selling may not last that long as the U.S. faces the fiscal cliff,” he said, referring to more than $600 billion in tax increases and spending cuts that will be implemented in 2013 unless Congress acts.

The dollar depreciated 0.3 percent to $1.2854 per euro at 8:23 a.m. London time after earlier strengthening as much as 0.2 percent. The greenback declined 0.1 percent to 80.24 yen after dropping to 79.81 yen, the weakest since Nov. 1. The euro rose 0.2 percent to 103.16 yen.

Obama won the battleground states of Ohio, Virginia, Iowa, New Hampshire, Wisconsin, Nevada and Colorado. He also carried Pennsylvania, where Romney made an 11th-hour bid for support to try to derail the president’s path to re-election.
Votes were still being tallied in Florida and the state was too close to call.
Romney Disagrees

Romney had said he disagreed with the Federal Reserve’s measures to stimulate the economy and would replace Chairman Ben S. Bernanke at the end of his term in January 2014.

The central bank unveiled a plan in September to buy $40 billion of mortgage-backed securities every month in a third round of so-called quantitative easing after $2.3 trillion purchases of bonds from December 2008 and June 2011.

The extra yield investors demand to hold two-year U.S. Treasuries instead of similar-maturity Japanese government bonds shrank to 17 basis points, the least since Oct. 16, curbing the allure of the dollar over the yen.

The yield on U.S. 10-year Treasuries, a benchmark for borrowing from mortgages to corporate bonds, has dropped 17 basis points this year. It has tumbled 68 basis points since Obama took office on Jan. 20, 2009.
Fed Easing

Treasuries have returned 1.8 percent in 2012 and 15 percent since his inauguration, according to Bank of America Merrill Lynch indexes.

“Obama’s re-election is likely to boost expectations of continued easing by the Fed,” said Junya Tanase, chief currency strategist at JPMorgan Chase & Co. in Tokyo. “If it leads to lower U.S. yields and higher stock prices, the bias will be for the dollar-yen to fall.”

The Australian dollar strengthened as the MSCI Asia Pacific Index of shares gained 0.7 percent and the Stoxx Europe 600 Index advanced 0.4 percent.

“The Aussie has popped in a very short-term market reaction,” said Sacha Tihanyi, a senior currency strategist at Scotiabank in Hong Kong. With Obama poised to begin another four-year term, “the consistent approach that will be executed by the current administration is positive. The one thing we don’t need these days is uncertainty.”

The Australian currency gained 0.3 percent to $1.0470 after rising 0.9 percent over the previous two days.
Greece Concern

Demand for the euro was tempered as Greece headed for a vote on austerity measures needed to keep its bailout on track.

The 238 pages of additional austerity plans, ranging from raising the retirement age to eliminating Christmas and holiday payments for pensioners, will be debated in Parliament from 10 a.m. Athens time with a roll-call vote expected after 8 p.m. today. Approval of the legislation is the first of the parliamentary votes required by Nov. 12 to unlock a 31 billion- euro portion of international aid.

“Europe’s problems are far from being resolved,” said Marito Ueda, senior managing director in Tokyo at FX Prime Corp.. (8711) “There is a good chance that we see a sell-off in the euro when they return to the center stage.”

The euro declined 1.2 percent over the past month, according to Bloomberg Correlation-Weighted Indexes, which track 10 developed-nation currencies. The dollar rose 0.5 percent and the yen fell 1.7 percent.

To contact the reporters on this story: Monami Yui in Tokyo at myui1@bloomberg.net; Lucy Meakin in London at lmeakin1@bloomberg.net.

To contact the editor responsible for this story: Paul Dobson at pdobson2@bloomberg.net.

Dollar Falls as Obama Win Paves Way for Monetary Easing - Bloomberg

Dow's biggest loss in a year

Is the market overreacting?

Obama's to-do list can't wait


Updated: 11/07/2012 06:45 ET

Symbol	Last	Change
DOW	12,932.73	-312.95
NASDAQ	2,937.29	-74.64
S&P	1,394.53	-33.86

Investors Fear More Than Just a 'Fiscal Cliff'


Submitted by RickAckerman on 11/07/2012 19:01 -0500

• Federal Deficit
• Reality

The Dow plunged 313 points yesterday, but don’t believe news media reports that it was the nearness of the “fiscal cliff” that caused the selloff. What spooked investors is a bigger picture that recognizes the economically catastrophic implications of a second Obama term. To be clear, there is nothing Romney could have done to avoid the deflationary Depression that lies ahead. However, a Romney presidency might have at least served as a reality check on malfeasant fiscal practices, delaying the onslaught of hard times for perhaps long enough to allow Americans to put their financial houses in better order before austerity is imposed on us with the force of an earthquake, as it has been on Europe.



We’re not going to dwell on the choice Americans made on Tuesday. Suffice it to say, the election has substantiated conservatives’ worst fear – that, sooner or later, Big Government’s clients would come to outnumber those of us who pay for the criminal extravagances of their voracious welfare state. Actually, it turns out they needn’t have outnumbered us, since the quirks of the electoral college have enabled them to execute a coup even though they lacked a statistically significant majority.

Bread and Circuses

Now, with a $16+ trillion federal deficit that is growing by more than a trillion dollars per year, the nation’s descent toward insolvency can only accelerate, further widening the gap between tax revenues and outlays. Soaking the rich, even by taxing them at 100%, would not begin to arrest the decline, but just try to tell that to those who voted for Obama. Bread and circuses will be their reward, and far be it from us to predict that they will feel unsatisfied. Rather, the opposite should hold true, since it will not have cost the 47% a dime.

As far as the stock market is concerned, we were quite surprised to find some bullish opportunities in the dozen or so charts reviewed in real time during a “Hidden Pivot Analysis” session held Wednesday morning at Rick’s Picks. Amazon, Priceline and Facebook, among others, look promising, suggesting these companies, and presumably a few others, may be able to buck a depressionary tide, perhaps by focusing on nickel-and-dime sources of revenue. If you’re interested in the details, as well as the reasons for our bearish outlook on the broad averages, a recording of the session is publicly available.

Investors Fear More Than Just a 'Fiscal Cliff' | ZeroHedge

Obama's Re-Election Party Cut Short By Biggest Market Plunge In 1 Year


Submitted by Tyler Durden on 11/07/2012 16:16 -0500

• Copper
• Equity Markets
• Greece
• NASDAQ
• Price Action

As the Romney bounce was removed last night, German (and European) growth is lowered, AAPL's dominance is questioned, and the 'fiscal cliff' (oh yeah that) comes into focus, is it any wonder equity markets dumped today. Depending on which index you looked at, equities fell the most in a year (or a month) with the Dow and Nasdaq closing below their 200DMA.



The day's plunge was stalled at the European close with S&P futures down 48 points from their overnight highs. Much was made of the 'off the lows' nature of the post-Europe move - but all of that bullshit was dashed as we crumbled (inverse eBay-like) on considerable volume into the close after touching VWAP.



leaving S&P 500 futures on edge...



Gold and Silver held up well on the day (+3 and 2.5% on the week) - though the latter well off its highs - as oil plunged back catching down to copper on the week.



USD strength into the European close dribbled away all afternoon - leaving it +0.25% on the week. Treasury yields leaked back a little wider into the close but remain down 5-8bps on the week.In general risk assets led the way lower overnight and into the US day session; its clear from the chart below that the European close saw a flush of selling relative to risk - which likely spurred the rebound we saw but the close seemed like hedgers fearsome of news (Greece?)



Our call yesterday that the strength did not feel like risk-on seems prescient now and the plunge into the close today suggests more than a few others used that VWAP ramp (and Boehner's speech) to reduce size more.

VIX closed at 19% - its highest in 3 months...

Charts: Bloomberg and Capital Context

Bonus Chart: Everyone's favorite AAPL... Log-scale chart - so a linear-regression means that trend was exponential... Current price action just broke below 200DMA and -2 Sigma trend line... lasttime this happened we fell 43% and 53% in the next 40 days...




Obama's Re-Election Party Cut Short By Biggest Market Plunge In 1 Year | ZeroHedge

Stocks Plunge After Election - EU Woes Deepen