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Summary In early reactions, financial markets took a gloomy view of the outcome of the knife-edge vote.
The dollar stumbled against major currencies and stock markets were mixed in Asia Wednesday as US elections handed President Barack Obama a second term but no change to the nations political gridlock.In early reactions, financial markets took a gloomy view of the outcome of the knife-edge vote, which promises more partisan politics in the US Congress, with Republicans projected to retain the House while Democrats hold the Senate.The euro bought $1.2864 in Tokyo, up from $1.2788 earlier Wednesday and $1.2814 in New York late Tuesday. The greenback was also weaker against the yen, at 80.05 yen compared with 80.34 yen in New York.The dollar was broadly lower against other Asia-Pacific currencies. The Australian dollar rose to $1.0447 from $1.0432 while the greenback sank to 1,086.15 Korean won from 1,091.20 won.Markets have reacted with US dollar losing a little bit of ground that its gained over the last few days as an initial knee-jerk reaction, said Jason Hughes, head of premium client management for IG Markets Singapore.We still have the stalemate that was there with the conservatives in the House not going to be allowing progress around the Obama plans, he added.Asian stock markets saw cautious trade early Wednesday as investors awaited the outcome of the nail-biting presidential race, and as Obamas supporters erupted in celebration the reaction remained muted.Tokyo was flat in late trade, Hong Kong was up 0.40 percent and Seoul gained 0.18 percent. Sydney added just 0.71 percent, while Shanghai eased 0.10 percent.Observers of the deficit-ridden US economy are focused on the prospects for a break in a stalemate that has paralysed the do-nothing Congress as the nation barrels towards a dangerous financial reckoning.With a combination of expiring tax breaks and federal spending cuts looming, there are fears the US economy could plunge over a so-called fiscal cliff in January unless politicians find a compromise on reducing budget deficits.An Obama victory was seen among traders as a dollar-selling cue as it may also herald further easing measures by the US Federal Reserve, after the central bank ushered in a vast bond-buying programme to spur the worlds biggest economy.Investors have been factoring in his win and adjusting their positions likewise, said Kengo Suzuki, forex strategist at Mizuho Securities in Tokyo.The issue now is the uncertainty surrounding the US fiscal cliff, and how a divided Congress will deal with the issue, he added.However, Takumi Nomura, a senior dealer at Bank of Tokyo Mitsubishi UFJ, said the dollar may be underpinned by optimism that as the incumbent, Obama may be able to address the issue more quickly than a newly elected leader.The fiscal cliff that will dominate discussions in Congress between now and Christmas is a major threat to the economy after a protracted but possibly reckless compromise was agreed last year between Democrats and Republicans.If Congress fails to agree on how to cut spending over the medium term, the current deal would force deep, immediate spending cuts that could tip the United States back into recession in a major blow for the slowing global economy.
