Forex – Dollar on Back Foot as Markets Digest Midterm Results

© Reuters. – The dollar was broadly lower against a basket of the other major currencies on Wednesday after Democrats won control of the House of Representatives while Republicans tightened their hold on the Senate in the U.S. midterm elections.

A divided Congress, with a Democratic House and a Republican Senate, raises the prospect of gridlock in Washington which will significantly curtail President Donald Trump’s legislative agenda.

The greenback has strengthened broadly this year, boosted by a robust domestic economy, rising interest rates and the effects of U.S. fiscal policy.

The , which measures the greenback’s strength against a basket of six major currencies, was down 0.38% to 95.75 by 03:53 AM ET (08:53 AM GMT).

The index hit a 16-month high of 96.98 last week, boosted by expectations that the Federal Reserve will continue to raise interest rates this year and beyond as the U.S. economy remains strong.

The Fed is to kick off its two-day policy meeting on Wednesday, but is not expected to announce any changes to monetary policy, ahead of a widely anticipated rate hike in December.

The euro gained ground against the dollar, with rising 0.35% to 1.1467.

The yen was also higher, with sliding 0.23% to 113.17.

The pound rose to its highest level since October 17, with up 0.31% to 1.3140 as expectations for a Brexit deal continued to underpin demand.

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