As Biden’s Transition Becomes More Transparent, The Dollar Weakens

On early Tuesday the dollar saw selling in European trade, as lucidity over the U.S. political transition emerged and the tapping of Janet Yellen to be the next Treasury Secretary strengthened expectations of an expansive fiscal policy under President-elect Joe Biden.

The Dollar Index, which tracks the bucks against a basket of six other currencies, was down 0.3% at 92.252, after seeing its lowest level since Sep. 1st. EUR/USD went up by 0.3% to 1.1873, helped by an upward revision to German third-quarter GDP growth to 8.5% from an initially reported 8.2%, while USD/JPY fell 0.2% to 104.30. The risky AUD/USD rose 0.9% to 0.7353.

A lot of doubts surrounding the transition of power in the U.S. was elevated Monday when Emily Murphy,  effectively accepted Biden as the winner of the presidential election, saying he could have briefings and funding to ease his transition into the role.

Even though Trump vowed  to continue fighting to try and overturn the vote in several states, he did tweet his approval of the move.

Murphy had withheld her decision for weeks after the Nov. 3 election, resulting in the markets being unsure whether there would be an extended political vacuum. The removal of these fears has led to traders seeking out more risk, to the detriment of the safe haven dollar.

Helping the positive risk sentiment was the appointment of former U.S. Fed Chair Janet Yellen to be Treasury Secretary in the upcoming Biden administration. Yellen not long ago called for more federal spending from Congress to confront the economic devastation caused by the virus, and is widely seen as encouraging the low interest rate policy the Federal Reserve has adopted to fight the pandemic.