The US dollar weakened to its lowest level in over a month on Thursday following the Democrats' decisive victory in the midterm elections. The political shift led to a decline in oil prices and Treasury yields, as markets anticipated a less aggressive policy agenda under President Donald Trump. The dollar index dropped 0.22% to 101.25, while the euro rose 0.29% to $1.1261, and the yen strengthened 0.27% to 157.95 per dollar.
The yield on 10-year US Treasury notes fell 4.5 basis points to 4.847%, reflecting the market's reaction to the election results. Despite the political changes, expectations for a Federal Reserve rate hike in December remained high, with an 80.7% chance priced in. Key labour market data, including initial jobless claims and non-farm payrolls, were set to influence Fed policymakers' decisions.
Sterling climbed 0.12% to $1.349, nearing a seven-week high ahead of a Bank of England policy decision expected to raise rates. The Bank of Japan's September meeting minutes reinforced bets for further interest-rate hikes, pushing the yen higher. Meanwhile, the Australian dollar edged up 0.07% to $0.7009, and New Zealand's kiwi dollar surged 0.41% to $0.5641.
In cryptocurrencies, bitcoin gained 0.22% to $80,357.66, and ether rose 0.11% to $2,419.79. Analysts noted that market movements might reflect short-term positioning rather than long-term trends, with the drop in oil prices and yields supporting risk sentiment.