Analysts predict a split Congress could see the dollar fall further with Democrat gain seen as a rejection of President Donald Trump and his policies that have boosted corporate growth.
And earlier losses were extended wth the dollar now down 0.6 percent against other major currencies as a new 12-day low.
Kathy Lien, managing director of currency strategy at BK Asset Management, said: “If Congress is split, with the Democrats controlling the House and Republicans the Senate, the prospect of legislative gridlock that would make it difficult for policies such as the President’s middle-class tax cut to pass is negative for the U.S. dollar.”
The dollar index, a gauge of its value versus six major currencies, lost 0.28 percent to trade at 96.04.
The pound was 0.13 percent higher against the dollar at $1.3116, sitting slightly below a three-week high of $1.3142.
Sterling slipped as low as $1.3023 yesterday before bouning back in volatile trade on growing hopes of a breakthrough Brexit deal.
Economists were taken by surprise when it jumped to a two-week high after the BBC’s Laura Kuenssberg tweeted that Brexit secretary Dominic Raab had given reporters a “thumbs-up” following a crunch cabinet meeting.
The gesture was enough to send sterling up to its best position since 22 October.
Elsewhere, the euro gained 0.15 percent to trade at $1.1443 versus the dollar, off its intraday high of $1.1473. The single currency changed hands about 1.1 percent above this year’s trough of $1.1301 reached on Aug. 15.
The dollar lost 0.19 percent against the yen, to trade at 113.21. Earlier in the session, the yen had strengthened to 112.95. The Australian dollar traded flat at $0.7245.
The dollar has outperformed most of its key rivals this year, benefiting from a robust domestic economy and higher interest rates, and any post-election setbacks are expected to be shortlived.
DBS Currency Strategist Philip Wee said: “Overall, it is too early to believe that the US dollar has reversed its uptrend.
“The Fed is likely to be encouraged by last Friday’s jobs data that US wage growth has finally picked up.
“The Fed is likely to reaffirm, at its FOMC meeting on November 8, its intention to lift its policy rate above 3 percent over the next year.”
The mid-term election result is seen as unlikely to have a material impact on the US-Sino trade dispute, and the dollar can be expected get a safe-haven bid if trade tensions between Washington and Beijing intensify.
Wall Street stock futures and Asian shares lost steam as a result of the Democrats’ victory.
But ahares roared ahead in early trading in Europe, as investors react to the midterm election results.
In London the FTSE 100 has gained 80 points, or more than 1 percent, to 7,119. The French CAC and German DAX are both also up around 1 percent.
Some traders are concluding that political gridlock in Washington could actually be good for the US, if it stops Donald Trump driving up the US deficit.
Simon French, chief economist at stockbrokers Panmure Gordon, argues that the midterm result is “as good as you could hope”.
Having the president’s wings clipped by losing control of the House is helpful for avoiding the most obvious “end of cycle policy mistakes” – which in our view is pumping more deficit spending and protectionism into the economy, forcing the Fed to tighten at a faster rate.