By Yasin Ebrahim
Investing.com – The dollar slump Tuesday as Wall Street warned investors that a victory for former vice president Joe Biden could hurt the greenback, with the latest surveys suggesting that President Donald Trump is lagging behind Joe Biden in key battleground states.
The U.S. dollar index, which measures the greenback’s strength against a trade-weighted basket of six major currencies, fell 0.64% to 93.5.
Former Vice President Biden holds a lead over Trump across key swing states including Arizona, Florida, Pennsylvania, and Wisconsin, according to the New York Times/Siena College poll.
“Should Biden manage to secure one of those three states (especially Florida or North Carolina) then the chances for Donald Trump would fall dramatically,” ING said in a note. “In other words, while there is a high risk of a delay in the result, there is also a material chance that Joe Biden may have virtually secured a win by 03:00 EST (08:00 GMT) if results show he’s clearly ahead in those states.”
A Biden victory could spell bad news for the dollar as the former vice president is unlikely to continue with Trump’s trade war against China and the EU, boosting “American imports from overseas and thus add to the global supply of dollars,” Paul Craig of Quilter Investors, the asset manager, said, according to the Telegraph.
Goldman Sachs (NYSE:GS), however, suggests that the dollar is set to fall regardless of who emerges victorious as negative real interest rates in the U.S. and a sharp global economic recovery from the Covid-19 recession represent "standard recipe for broad dollar weakness.”
"We are currently forecasting about a 15% depreciation in the real trade-weighted dollar from this year's peak to the end of 2023, but a larger move is certainly possible," it added.