Dollar Slides to One-Month Low as Midterm Wave Hits Yields and AI Bets

The US dollar fell to a one-month low on Wednesday, November 4, as early results from the midterm elections pointed to Democrats taking control of both chambers of Congress. The dollar index, which tracks the greenback against six major currencies, dropped 0.6% to 101.27, while the euro rose 0.6% to $1.1258 and the yen strengthened almost 0.8% to 157.92 per dollar. The Swiss franc, the other classic haven in the mix, gained 0.6% to 0.8159 per dollar, and sterling climbed 0.3% to $1.3458 ahead of the Bank of England meeting on Thursday. Behind the currency moves sat a bond-market move: the yield on the 10-year US Treasury note fell nearly five basis points to 4.915%, as investors bought government debt while they weighed what divided government would mean.

The market logic runs in two directions at once, and both point the same way for the dollar in the short term. First, a Congress controlled by the opposition is expected to make large new tax cuts or spending programmes harder to pass, which eases concern about extra Treasury borrowing and pulls yields down. Second, traders read a Democratic sweep as a threat to the artificial-intelligence trade that has powered US stocks and capital inflows for months: tighter scrutiny of big technology and data-centre building could slow the growth engine that has kept the dollar supported.

The rest of the currency board told a more mixed story, which is a useful warning against reading Wednesday as a single, clean trend. China’s offshore yuan eased 0.2% to 6.6836 per dollar, extending its fall from Tuesday, when the People’s Bank of China raised the share of foreign currency that banks must hold in reserve in a bid to slow the yuan’s rally — the currency’s steepest one-day drop since May 15. Gold, meanwhile, rose more than 2% to above $4,000 an ounce on the weaker dollar, and the New Zealand dollar gained even after its unemployment rate rose to 5.7% in the third quarter, worse than the 5.5% expected.

Why this matters is less about one day’s levels than about what the move reveals. The dollar’s recent strength has rested heavily on US equity enthusiasm and the capital it attracts, so a political shock to that story can move currencies faster than a central-bank speech. Yet the policy case for a lasting dollar decline is weaker than the price action suggests: as strategists noted on Wednesday, passing federal legislation remains difficult even after a sweep, given the presidential veto, and gridlock itself can be supportive for bonds without changing the underlying economy.

What to watch next is a crowded 48 hours that will test whether politics or economics drives the next move. Wednesday brings eurozone preliminary October inflation, expected at 4% after 3.8% in September, plus US ADP employment and ISM services data; Thursday brings a Bank of England decision, with a 25-basis-point rise expected for the first time since August 2023; and Friday brings the US October jobs report. Any of those can move yields, and through yields, currencies — which is why position sizing matters more than prediction in a week like this. Our forex section explains how bond yields feed into exchange rates, and the forex tools page has pip and position-size calculators for planning risk before trading a political headline. (Not financial advice.)