The US dollar traded lower against other major currencies on Thursday as President Donald Trump sued states over alleged election irregularities, while his rival, Democrat Joe Biden, pulled ahead in electoral votes.

The dollar index, which tracks the greenback against a basket of currencies, was down about 0.6 percent, before partly erasing the losses. The US currency depreciated against the British pound and the yen by around 0.2 percent, and briefly slipped to its weakest level in more than two years against the Chinese yuan. It was also down against the Canadian dollar as well as Australian and New Zealand dollars.

The drop came as Biden collected 264 of the 270 electoral votes needed to get to the White House after winning in several key battleground states, while incumbent President Donald Trump had 214 votes. The Trump campaign has already filed lawsuits in Pennsylvania, Michigan, and Georgia, after the president accused his opponents of attempting to “steal” the election with ballot dumps in favor of Biden.

Investors warn that the election uncertainty could negatively impact the dollar in the short run. Some say the market is already trying to price in Biden’s victory, which is evident from the appreciation of the currencies that were affected by Trump’s punitive tariffs. Others warn that the greenback will not immediately bounce back if Biden is elected.

“That’s the real question, whether today is a one-day wonder, or we get follow-through. My guess is we get follow-through,” Marc Chandler, chief market strategist at Bannockburn Global Forex, told CNBC.

The markets are also waiting for news from the US Federal Reserve, which is expected to finish its two-day meeting on Thursday. However, the Fed is not expected to announce any major changes in monetary policy, especially amid the election uncertainty.

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