Trump Turbulence: The Dollar Takes Off

The US dollar surged as US Treasury yields soared. Investors increasingly seem to be betting on Donald Trump's return to the White House. The US currency gained strength against the euro, yen, and pound as traders engaged in so-called 'Trump trades.' The former president plans to raise tariffs and cut corporate taxes, which could fuel inflation and keep interest rates high. Although results are still unclear in several key states, investors are celebrating Trump's victories over Kamala Harris in the southern states of Georgia and North Carolina. "For currency markets, there's a clearer direction with a Trump versus Harris plan," explained Skylar Montgomery Koning, a currency expert at Barclays in New York. The Dollar Index, which measures the currency against a basket of competitors, rose by 1.5 percent—the biggest daily gain since September 2022. The yield on the 10-year US Treasury note reached 4.46 percent, the highest level since early July. The 30-year 'Long Bond' climbed to 4.63 percent, a significant increase of 0.15 percentage points. The Mexican peso, known to be vulnerable to Trump's tariff plans, fell by up to 3 percent to a low of 20.73 against the dollar. "Trump's tariffs could, if he wins and implements them, cause considerable distress," warned Ray Attrill of the National Australia Bank, urging caution against hasty investments. In the currency markets, devaluations in the yen led to a rally in the export-oriented Japanese stock market, with the Nikkei 225 Index rising by 2.3 percent. Chinese markets registered a decline; the Hang Seng Index in Hong Kong lost 2.5 percent. The offshore renminbi, whose exchange rate is not set daily by the Chinese central bank, weakened by 1 percent against the dollar. According to Jason Lui of BNP Paribas, investors are preparing for potential challenges under a second Trump administration. Initial risky price movements could occur if Trump secures a decisive victory. Bitcoin hit a new record, rising over 7 percent to $75,060. Trump is positioning himself as a pro-cryptocurrency candidate, promising to make the US the 'world's Bitcoin superpower.'