Dollar slides to 101.10 as yields fall

The US Dollar Index (DXY) touched 101.10 on November 4, marking a five-week low after Democrats swept both chambers of Congress in the US Midterms. The decline represented a drop of roughly 1.7% from the currency’s 18-month peak of 102.87 recorded in October.

Investors moved away from the dollar amid falling Treasury yields and uncertainty over Washington’s economic policies following the election results. However, the currency rebounded to 102.28 on November 6, indicating that the recent selloff has not yet determined the dollar’s longer-term trajectory. The dollar remains approximately 4% higher in 2026 compared to its starting level.

Political Gridlock and Yield Pressure

Three primary factors contributed to the pressure on the dollar. First, Democrats winning both the House and the Senate could restrict President Trump’s spending plans. Invesco strategist David Chao noted that Democratic control of Congress would make it harder for the White House administration to pass major partisan legislation. Smaller fiscal stimulus expectations may reduce government borrowing, which in turn eases pressure on Treasury yields.

Second, bond yields have declined significantly. The 10-year Treasury yield dropped from around 5.3% in early October to 4.92% on November 4. Lower yields reduce the appeal of dollar-denominated investments, weakening demand for the currency.

Third, concerns over US economic growth emerged. Investors fear that a Democratic Congress could tighten oversight of the artificial intelligence industry, a sector driving significant US investment. This prospect has already rattled technology stocks, adding to the broader market uncertainty affecting the dollar.

Jobs Data and Technical Outlook

The latest economic data complicated the bearish outlook for the dollar. The US added 165,000 jobs in October, a figure that substantially beat expectations. This strong performance strengthened bets on another Federal Reserve rate hike in December, helping the dollar recover on Friday.

For investors, the implications of a weaker dollar are mixed. A softer currency can boost overseas earnings for multinational companies and ease financial conditions. However, renewed inflation or higher interest rates could hurt growth stocks. In the crypto market, dollar weakness and declining yields generally favor risk assets, including Bitcoin. Nevertheless, Bitcoin lost more than 5% during the recent AI-driven market selloff, demonstrating that crypto assets can still fall when investors become concerned about the broader economy.

Technical charts identify two possible paths for the dollar. A bullish scenario requires the DXY to hold above the 100.90–101.15 support zone, which could support a move toward the 102.87–103 range. A bearish scenario involves a sustained break below 100.90, which could expose the 100.20–100.60 area, followed by the 99 level. The weekly chart shows a rising wedge, suggesting the broader uptrend remains vulnerable, while the daily chart highlights the importance of the 101 support area.

Analysts expect the US economy to have grown 2.1% in the second quarter, while the Atlanta Fed’s GDPNow model points to just 1.6% growth. With tariffs, oil volatility, and the US-Iran conflict in focus, the next inflation report and Federal Reserve signals could decide which technical scenario develops.