What Lies Ahead of Global Currency ETFs If Biden Wins?

Sanghamitra Saha
·3-min read

In the final days of U.S. Presidential races, investors may be interested in knowing the impact on the currency world once the winner of the race is announced. According to the latest polls undertaken in October on the upcoming U.S. election, Democratic Biden has a more than 50% chance of winning the upcoming election.

On average, Biden is ahead by around 52.5%, according to poll aggregator FiveThirtyEight, as quoted on a source. In comparison, Republican Trump is trailing by 41.8%. However, Nov 3 is still about two weeks away and sentiments may change anytime. “With a little less than a month to go, the national polling aggregate has differed from the actual result by an average of a little more than four points since 1936,” the CNN article noted.

Even though Biden has maintained a strong lead over Trump for long, the latest indicators suggest that the lead is narrowing, and could also be reversing. Still, at the current level, many may be interested to know the likely impact on the global currency market if Biden wins.

Invesco DB US Dollar Index Bullish Fund UUP – Possible Loser

Goldman Sachs recently said that the U.S. dollar may slip to its lows of 2018 on the increasing likelihood of Democratic candidate Joe Biden winning the U.S. election and progress on a coronavirus vaccine (read: Goldman Expects Dollar Weakness: ETFs to Play).

Rock-bottom interest rates, higher taxes, ebbing tensions with China and a relatively tepid Wall Street (due to Biden’s intention to hike tax rate) could result in the weakness in the greenback if Biden wins, although that could be tempered if there is a big fiscal stimulus, per foreign exchange analysts as quoted on S&P Global  (read: A Biden Presidency in the Making? ETF Strategies to Follow).

WisdomTree Chinese Yuan Fund CYB – Possible Winner

The Chinese yuan has lately been gaining credibility as a safe haven from volatility as it recorded its best quarter in 12 years. The United States and China have levied billions of dollars worth of tariffs on each other’s goods in a trade dispute in the past years. With Biden saying that tariffs have weighed on American businesses and consumers, trade tensions are likely to wane ahead. This should benefit Chinese Yuan.

In any case, the onshore renminbi gained about 4% in the third quarter, the most since early 2008, while its offshore counterpart made a move of more than 4%. That has beaten returns from traditional Group-of-10 refuges like the Swiss franc and Japanese yen (read: China Yuan's Best Q3 Since 2008: ETFs to Benefit/Lose).

Invesco CurrencyShares Euro Currency Trust FXE – Possible Winner

If the dollar loses, the euro will gain strength. The Euro is the currency of 19 European Union countries. The currency has been strengthening of late despite the central bank’s easy money policies (read: Euro/Dollar Parity at Two-Year High: ETFs to Gain/Lose).

Invesco CurrencyShares Australian Dollar Trust FXA –Possible Winner

If there is a blue sweep, America could get a fat fiscal stimulus, which means a high-risk appetite. The Australian dollar has been viewed as a risk-on asset hence there is a chance of a rally in Australian dollar.

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Invesco CurrencyShares Euro Trust (FXE): ETF Research Reports
 
Invesco DB US Dollar Index Bullish ETF (UUP): ETF Research Reports
 
WisdomTree Chinese Yuan Strategy ETF (CYB): ETF Research Reports
 
Invesco CurrencyShares Australian Dollar Trust (FXA): ETF Research Reports
 
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