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The dollar retreated as markets brace for the upcoming U.S. election and a pivotal Federal Reserve policy meeting.
With the outcome still uncertain, investors initially positioned themselves for a potential re-election of Donald Trump last week.
However, as new projections indicate a tighter race, with Vice President Kamala Harris emerging as a potential favorite, market participants could continue to adjust their positions. This shift is weighing on the greenback following a rally tied to the expected Trump’s fiscal and trade policies.
The Fed’s monetary policy decision, scheduled for Thursday, adds another layer of uncertainty. Following an aggressive cut of 50 basis points, a more cautious reduction of 25-basis points is now expected. In response to these uncertainties, short-term note yields have inched up, while longer-dated yields have softened as the markets adopt a “wait and see” approach.
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