MUFG's Maruyama Estimates 60% Chance of Weaker Dollar Following U.S. Presidential Election

By: via PR Newswire

NEW YORK, Oct. 29, 2020 /PRNewswire/ -- Motoki Maruyama, Managing Director and Head of FX and Rates Trading in the Americas for Mitsubishi UFJ Financial Group (MUFG), estimates the probability of a weaker dollar in the near term at 60% following the U.S. presidential election on November 3.

(PRNewsfoto/Mitsubishi UFJ Financial Group,)

Election scenarios—and their short-term consequences

"A scenario in which the Democratic Party wins the White House, gains a majority in the Senate and retains a majority in the House of Representatives would likely unleash a multi-trillion-dollar package of fiscal stimulus and result in a major expansion of the budget," says Mr. Maruyama. "In the short term, Washington's effort to issue trillions in new debt in order to spend its way out of a recession would lead to a 'risk-on' environment and a sell-off in the dollar that would exert downward pressure on its value."

Conversely, in Mr. Maruyama's view, three scenarios would lead to a "risk-off" environment and a stronger dollar in the near term: (1) a White House victory by Democratic nominee Joseph R. Biden with Republicans retaining their majority in the Senate; (2) a victory by the incumbent President, Mr. Donald J. Trump; or (3) a contested election result with no clear winner for a protracted period. "All three scenarios could amplify political gridlock and throw prospects for a stimulus plan into question—at least in the immediate future—since we believe the Democrats will likely keep control of the House of Representatives," he says.

Long-term view: A weak dollar, mixed trends among emerging-market currencies

Over the longer haul, Mr. Maruyama believes the dollar will weaken against most major currencies regardless of the election outcome, since U.S. interest rates are likely to remain low in the foreseeable future. He also predicts that the currencies of emerging markets running current account deficits whose economies are dependent on the export of natural resources—such as Brazil, Mexico, Argentina, South Africa and Turkey—will weaken over time, especially if the COVID-19 pandemic persists and continues affecting their economies.

In contrast, currencies of select emerging economies in Asia that have reigned in the pandemic, maintained stable or growing economies and enjoyed current account surpluses—including China, South Korea, Taiwan and Singapore—will strengthen in the long run, in Mr. Maruyama's view.

MUFG is one of the world's largest financial institutions by assets, with approximately $3.2 trillion, as of June 30, 2020.

About Mitsubishi UFJ Financial Group, Inc.'s U.S. Operations including MUFG Americas Holdings Corporation

The U.S. operations of Mitsubishi UFJ Financial Group, Inc. (MUFG), one of the world's leading financial groups, has total assets of $379 billion at June 30, 2020. As part of that total, MUFG Americas Holdings Corporation (MUAH), a financial holding company, bank holding company, and intermediate holding company, has total assets of $167.4 billion at June 30, 2020. MUAH's main subsidiaries are MUFG Union Bank, N.A. and MUFG Securities Americas Inc. MUFG Union Bank, N.A. provides a wide range of financial services to consumers, small businesses, middle-market companies, and major corporations. As of June 30, 2020, MUFG Union Bank, N.A. operated 348 branches, consisting primarily of retail banking branches in the West Coast states, along with commercial branches in Texas, Illinois, New York, and Georgia. MUFG Securities Americas Inc. is a registered securities broker-dealer which engages in capital markets origination transactions, domestic and foreign debt and equities securities transactions, private placements, collateralized financings, and securities borrowing and lending transactions. MUAH is owned by MUFG Bank, Ltd. and Mitsubishi UFJ Financial Group, Inc. MUFG Bank, Ltd., a wholly owned subsidiary of Mitsubishi UFJ Financial Group, Inc., has offices in Argentina, Brazil, Chile, Colombia, Peru, Mexico, and Canada.

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About MUFG

Mitsubishi UFJ Financial Group, Inc. (MUFG) is one of the world's leading financial groups. Headquartered in Tokyo and with more than 360 years of history, MUFG has a global network with over 2,700 locations in more than 50 countries. The Group has over 180,000 employees and offers services including commercial banking, trust banking, securities, credit cards, consumer finance, asset management, and leasing.  The Group aims to "be the world's most trusted financial group" through close collaboration among our operating companies and flexibly respond to all of the financial needs of our customers, serving society, and fostering shared and sustainable growth for a better world. MUFG's shares trade on the Tokyo, Nagoya, and New York stock exchanges.

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Assaf Kedem
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