Dollar drops as stocks surge, fed keeps policy unchanged

U.S. dollar banknotes. Liu Jie | Xinhua | Getty The U.S. dollar fell to a two-week low against a basket of currencies and a seven-month low against the Japanese yen as surging stock markets

reduced demand for the greenback, and as the Federal Reserve kept its loose monetary policy intact. Stocks jumped as bets on Republicans retaining control of the Senate eased worries of

major policy changes that could hurt corporate America under a Joe Biden White House, even as the presidential election hung in the balance. Democrat Biden on Thursday inched nearer to

victory over President Donald Trump in an exceedingly close U.S. election that hinged on razor-thin margins, while the Republican president launched a flurry of lawsuits hoping to slow down

his opponent. But the so called "blue wave," where Democrats also take control of the Senate in congressional elections, looked unlikely. "The investor class loves the idea of

a Democratic president and a Republican Senate that will return back to essentially a steady, normal state of affairs," said Boris Schlossberg, managing director of FX strategy at BK

Asset Management in New York. The dollar index fell 0.95% against a basket of currencies to 92.51. The euro jumped 0.99% to $1.1838. The dollar dropped 0.95% against the Japanese yen to

103.49 yen, the lowest since March 12, and breached technical support at 104 yen that will now likely form resistance. The yuan gained to a more than two-year high of 6.5994. The Chinese

currency has been heavily affected by Sino-U.S. disputes since the outbreak of a bilateral trade war in 2018. The dollar has been hurt by the Fed's zero rate policy and ongoing bond

purchases as the U.S. central bank aims to stimulate growth after the economy was ravaged by business shutdowns due to COVID-19. The U.S. central bank on Thursday pledged again to do

whatever it can in coming months to sustain a U.S. economic recovery. It was "virtually unchanged from the previous meeting's message," said Lou Brien, a market strategist at

DRW Trading in Chicago. Some analysts say the Fed may need to act further to boost the economy if there is no large fiscal spending, though others note that it is running out of tools. If

Treasury yields rise meaningfully the Fed is expected to shift more of its bond purchases to longer-dated debt to keep the rates low.