(Nov 4): The Swiss franc and Japanese yen jumped as US election results pointed to the Democrats winning both the House and the Senate, sending the dollar to its worst day in a month.

The franc rose almost 1% and the yen 0.7% in Asian trading, the biggest gains among major currencies as investors sought haven-like assets. Bloomberg’s dollar index fell as much as 0.4%, the most since Oct 2 while the risk-sensitive Australian dollar lagged peers.

Democrats are projected to flip control of the House and Senate in an election dominated by rising cost of living concerns. A sweep of Congress may herald tighter regulatory scrutiny, particularly of artificial intelligence companies, and restrain further government spending to constrain price pressure.

The prospect of tougher oversight weighed on equities, with AI-linked stocks seen as particularly vulnerable. S&P 500 Index futures fell as much as 1.4% while Nasdaq 100 contracts slid as much as 2.4%.

“The US dollar’s Achilles’ heel is being exposed” with its fortunes tied to the AI boom, said David Forrester, a senior strategist at Credit Agricole CIB in Singapore. “A Democrat blue wave that stifles datacentre buildouts and hobbles the AI boom would weigh on the US dollar.

Still, the pressure on the dollar may not last. Oil prices could rebound if US-Iran talks aimed at avoiding a return to all-out war fail, potentially lifting inflation expectations, raising bets on further Federal Reserve rate hikes and giving the dollar a boost. Trump also retains the ability to veto congressional efforts to constrain his policy agenda.

“Even if the Democrats win both houses of Congress, US President Trump is likely to veto any efforts to tighten AI regulations and introducing such regulations would be difficult from the perspective of competition with China,” said Rinto Maruyama, a senior strategist at SMBC Nikko Securities. “Eventually, there will likely be a reversal of the dollar’s weakness.”

Uploaded by Arion Yeow