The U.S. dollar weakened against other major currencies on Tuesday, ahead of Georgia’s runoff elections, which will determine whether Republicans or Democrats control the U.S. Senate – and with it, the likely fate of President-elect Joe Biden’s legislative agenda.

The elections will determine how much Biden can push through Democrats’ agenda, including rewriting the tax code, boosting stimulus and infrastructure spending.

The dollar was also impacted by China’s decision to raise its official yuan exchange rate. The Chinese central bank set the currency’s midpoint at 6.4760 per dollar, raising it by 1% from the previous level.

A report released by the Institute for Supply Management showed an unexpected acceleration in the pace of growth in manufacturing activity in the month of December.

The ISM said its manufacturing PMI climbed to 60.7 in December after dipping to 57.5 in November, with a reading above 50 indicating growth. Economists had expected the index to edge down to 56.6.

Markets were also looking ahead to the minutes of the Federal Reserve’s latest policy meeting.

The dollar index, which slid to 89.43, was last seen at 89.50, down 0.41% from previous close.

Against the Euro, the dollar weakened to $1.2300, down 0.35% from Monday’s level. Data from Destatis showed Germany’s retail sales turnover climbed by a real 5.6% from the previous year, which was faster than the expected growth of 3.9% but slower than the 8.6% increase logged in October.

The Pound Sterling was stronger against the dollar, fetching $1.3625 per unit, firming up from $1.3574.

The Yen strengthened to 102.72 a dollar, gaining from 103.13 a dollar on Monday.

The Aussie was stronger by about 1.25% with the AUD-USD pair quoting at 0.7760.

Against Swiss franc, the dollar weakened to CHF 0.8784, after fetching CHF 0.8815 on Monday.

Data from the Federal Statistical Office showed the consumer price index decreased 0.8% year-on-year in December, following a 0.7% fall in November. The core CPI fell 0.4% annually in December and declined 0.1% from the previous month.

The Loonie firmed up more than 0.8% against the dollar, firming up to C$1.2670 from C$1.2778, as oil prices rose more than 5%. Data released by Statistics Canada showed the industrial product price index in Canada fell 0.6% month-on-month in November of 2020.

The raw materials price index rose 0.6% over a month earlier in November, following a 0.4% gain in October.

The material has been provided by InstaForex Company – www.instaforex.com