Dollar Falls as Obama Win Paves Way for Monetary Easing

By Monami Yui and Mariko Ishikawa - Nov 7, 2012 12:34 PM GMT+0800

The dollar weakened on speculation President Barack Obama’s re-election victory will boost chances the U.S. will continue monetary stimulus policies that tend to weaken the currency.
The dollar reversed earlier gains versus the euro after Obama defeated Republican challenger Mitt Romney, according to television network projections that show the president winning the electoral votes needed for re-election. Demand for the euro was limited as Greece headed for a vote on austerity measures needed to keep its bailout on track.

“Monetary policy will remain loose under Obama so the dollar will be sold,” said Michiyoshi Kato, senior vice president of foreign-currency sales in Tokyo at Mizuho Corporate Bank Ltd., a unit of Japan’s third-largest bank by market value. “Dollar selling may not last that long as the U.S. faces the fiscal cliff,” referring to more than $600 billion in tax increases and spending cuts.

The dollar fell 0.4 percent to $1.2871 per euro as of 1:23 p.m. in Tokyo, after earlier gaining as much as 0.2 percent. It declined 0.4 percent to 80.04 yen. The euro added 0.1 percent to 103.05 yen, after touching 102.18 yesterday, matching the lowest since Oct. 16.
Romney had said he disagrees with the Federal Reserve measures to stimulate the economy and would replace Chairman Ben S. Bernanke at the end of his term in January 2014.

Greek Austerity

In Greece, the 238 pages of austerity measures, ranging from raising the retirement age two years to 67 to eliminating Christmas and holiday payments for pensioners, will be debated in the 300-seat Parliament from 10 a.m. Athens time with a roll- call vote expected after 8 p.m. today. Approval of the legislation is the first of the parliamentary votes required by Nov. 12 to unlock a 31 billion-euro ($40 billion) portion of international aid.

Greek Prime Minister Antonis Samaras must stem defections from his three-party coalition to convince European Union leaders that his government is serious about staying in the euro and implementing reforms. The government has lost as many as four supporters since being formed in June, with the latest defection coming from Socialist Pasok, which provides Samaras with the votes he needs for his majority in Parliament.
German industrial production probably fell for a second month in September, decreasing 0.7 percent from the prior month, according to the median estimate of economists in a Bloomberg News survey. A separate report may show euro-area retail sales slid 0.1 percent in September, according to another poll.
“Europe’s problems are far from being resolved,” said Marito Ueda, senior managing director in Tokyo at FX Prime Corp. (8711), a currency-margin company. “There is a good chance that we see a sell-off in the euro when they return to the center stage.”

To contact the reporters on this story: Monami Yui in Tokyo at myui1@bloomberg.net; Mariko Ishikawa in Tokyo at mishikawa9@bloomberg.net
To contact the editor responsible for this story: Rocky Swift at rswift5@bloomberg.net