The dollar index was down 0.2%, while Asian currencies rallied. The offshore Chinese yuan, considered a direct play on the Nov. 5 U.S. election, rose to the highest in two-and-a-half weeks.The Indian rupee is expected to open higher on Monday, on the back of a decline in the U.S. dollar amid likely unwinding of long positions in the lead up to the U.S. presidential election.
The 1-month non-deliverable forward indicates that the rupee will open at 84.04-84.06 to the dollar, compared with its previous close of 84.0750. Last week, the rupee traded in a narrow 3.5 paisa range, thanks largely to the Reserve Bank of India's repeated interventions.
"We are definitely going to have a much larger range this week. The U.S. elections and the Fed meeting are both big events," a currency trader at a bank said.
The dollar's decline was likely spurred by a poll released over the weekend, which prompted a drop in the odds of Republican Donald Trump winning the elections. A Trump win is expected to be a boost to the dollar, according to analysts. A high-profile poll released on Saturday showed that Vice President Kamala Harris was leading Trump 47%-44% in the state of Iowa, a turnaround from a September poll that had Trump with a 4-point lead.
Trump had convincingly won in Iowa in 2016 and 2020. Prediction markets have tightened the odds of the race over the past week, with "meaningful shifts over the weekend", MUFG Bank said in a note. While markets are focused squarely on the U.S. elections, it's important to keep the broader macro context in mind, MUFG said, pointing to the U.S. jobs report out on Friday. Meanwhile, the Federal Reserve is widely expected to cut rates by 25 basis points in its Nov. 6-7 meeting.
