Dollar slides as Biden quits US election race
The US dollar slid against several currencies after President Joe Biden said he will no longer seek re-election, leaving an uncertain path that could rattle markets.
The dollar was slightly lower against the pound (GBP=X), at 0.7734 and the euro (EUR=X) at 0.9183 but none of the loses are over 0.15%. The same in Asia, with the dollar slipping slightly against the yen (JPY=X).
The dollar’s reaction to Biden’s withdrawal has been subdued so far as such an announcement wasn’t ruled out and because investors will probably want to see what impact the decision will have in fresh polls.
“It looked like investors had already started to price President Joe Biden's withdrawal from November's race. The DXY dollar index opened in Asia today about 0.1% lower on the news, but quickly edged higher, as did US yields,” Chris Turner, analyst at ING, said.
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“Investors will now switch their attention to how Kamala Harris fares against Donald Trump in the opinion polls – assuming she is appointed the presidential candidate at the Democratic National Convention on 19-22 August,” he added.
President Joe Biden announced his withdrawal from the 2024 presidential race on Sunday, throwing his full support behind Vice President Kamala Harris as the Democratic nominee for the upcoming November election.
Biden's endorsement of Harris was swiftly followed by a wave of support from key Democratic figures and organis$ations. Harris, who has served as Vice President since 2021, is now poised to become the party's standard-bearer in a crucial election year.
Despite the overall positive reception, some key figures within the Democratic Party have remained silent. Among them is former Speaker of the House Nancy Pelosi, whose endorsement is seen as highly influential. Pelosi’s hesitation to publicly back Harris has raised questions and speculation about potential divisions or strategic considerations within the party.
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Commonwealth Bank of Australia strategist Joseph Capurso warned it was too early to read much into the dollar's reaction.
"The bottom line is what the polls show this week," Capurso said, explaining that a decline in odds for a Trump win should see the dollar weaken, and vice versa.
"Harris might be a stronger candidate, but is it enough to turn the polls?"
Meanwhile, the dollar strengthened against the yuan (CNY=X) in offshore trading after the People'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.
Investor sentiment has increasingly tilted in favour of Donald Trump securing a victory in the upcoming November election, a trend that has been gathering momentum over recent weeks. This shift gained additional traction following President Joe Biden’s lacklustre debate performance, which sparked doubts about his electoral prospects.
The stakes were heightened last week with the news of an assassination attempt on Trump. The incident led to a surge in market activity betting on his victory.
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