By Kate Duguid
NEW YORK (Reuters) – The U.S. dollar edged lower on Wednesday, with some investors tiptoeing back into riskier assets after midterm elections split power in the U.S. Congress, giving Democrats greater ability to check any major initiatives from President Donald Trump.
Traders pulled out of the safe-haven currency after the election results came in as expected. Some had worried that political instability might ensue if either party had won full control.
“There was this expectation that if we didn’t get a divided Congress, we might see risk sentiment becoming a little shaky, but since that didn’t happen we have a risk-on move,” said Mazen Issa, senior foreign exchange strategist at TD Securities in New York.
The greenback has been the surprise winner in the global currency markets this year after Trump and congressional Republicans passed a significant tax cut, and strong economic growth prompted the U.S. Federal Reserve to start steadily raising interest rates.
Market watchers believe the outcome of the U.S. midterm, with Democrats taking the House of Representatives and Republicans keeping control of the Senate, would make further tax cuts and deregulation unlikely for now.