Post-election Wall Street surge leads Asia higher, dollar off lows

While a divided Congress will make it harder for President Donald Trump to push through new legislation, such as additional tax cuts, investors do not expect a reversal of recently enacted tax cuts and deregulation.

“The key point after the midterm elections is that U.S. stocks showed they had developed immunity towards higher yields. The last time long-term Treasury yields were at this level a month ago, they had helped trigger a major fall by stocks,” said Junichi Ishikawa, senior FX strategist at IG Securities in Tokyo.

“Steady U.S. fundamentals will support this trend of equities and yields rising in tandem, which should also prop up the dollar in the longer term.”

The 10-year Treasury note yield <US10YT=RR> rose to 3.25 percent on Wednesday, its highest since Oct. 9, with Wall Street’s rally reducing demand for safe-haven debt.

The dollar index against a basket of six major currencies was at 96.18 , after pulling back from a 2-1/2-week low of 95.678 plumbed on Wednesday.

The greenback had fallen to the low on Wednesday in a knee-jerk reaction to the U.S. midterm election results, with a divided Congress seen dulling President Trump’s fiscal stimulus drive.

Some focus was on the Federal Reserve’s monetary policy due later on Thursday. The Fed, however, is not expected to hike interest rates until its next gathering in December and analysts expected this meeting to have limited market impact.

The euro was 0.05 percent higher at $1.1433 after pulling back sharply from a high of $1.1500 brushed earlier on Wednesday.

The dollar was a shade higher at 113.56 yen <JPY=> and in striking distance of a one-month peak of 113.82 reached the previous day.

In commodities, U.S. crude futures were flat at $61.67 a barrel after falling to an eight-month trough of $61.20 on Wednesday.

Oil was pressured after surging U.S. crude output hit another record and domestic inventories rose more than expected.