The dollar may strengthen over the last four months of the year if President Barack Obama is re- elected, and weaken if Republican challenger Mitt Romney is victorious, according to historical patterns.
The CHART OF THE DAY shows the Dollar Index, which measures the greenback against the currencies of six major U.S. trading partners, has gained from September through December in years since 1988 that a Democratic candidate has won the presidential election. The index has declined over that four-month period in years with a Republican victor.
“The dollar tends to have a positive correlation with an incoming Democratic administration, perhaps since Democrats tend to favor pro-growth policies to spur the economy,” said Joe Manimbo, a market analyst in Washington at Western Union Business Solutions, a unit of Western Union Co. (WU) This year, he said, “a GOP victory would inject uncertainty into markets, which would tend to weigh initially on risk and benefit safer assets, like the dollar.”
The Dollar Index rose 0.6 percent yesterday after falling 0.8 percent the prior week. The gauge has declined 1.5 percent since the beginning of September.
The index fell 6 percent in 1988, 2.7 percent in 2000 and 9.1 percent in 2004 amid Republican victories. It gained 17 percent in 1992, 1.9 percent in 1996 and 5.1 percent in 2008 amid wins for the Democratic party.
A Gallup poll of registered voters Oct. 2 to Oct. 8 showed Obama ahead of Romney by three points, while a Pew Research Center survey of likely voters Oct. 4 to Oct. 7 gave the Republican nominee a four-point lead.
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