Once vote counting began in the United States, the dollar started to gain value. This time, the greenback showed remarkable strength, hitting a one-year high, driven by the presidential race and renewed prospects around interest rates.
As Bloomberg reported, Republican Donald Trump's victory stoked demand for the US dollar, sending Treasury bonds higher. The 10-year Treasury yield jumped by 16 basis points to 4.43% on concerns that a Trump-led administration could delay interest rate cuts. The billionaire had previously hinted at tax cuts and hefty tariffs on imports, policies that could fuel inflation and leave the Fed with little choice but to maintain current interest rates.
According to Priya Misra, portfolio manager at JPMorgan Asset Management, Trump’s agenda of higher taxes and tariffs is a recipe for inflation and widening budget deficits, thus paving the way for high long-term interest rates.
The high-stakes election also helped the greenback strengthen against all of its major counterparts. The Bloomberg Dollar Spot Index gained 1.7%, putting heavy pressure on the euro, the yen, the Australian dollar, and the Swiss franc. The Mexican peso took the hardest hit, plunging by 3%.
While the US dollar enjoyed gains on its "presidential" ambitions, Bitcoin also rallied on the Binance exchange. Jumping by 9.34%, it hit an impressive high of $75,118 before stabilizing at $73,287.53, though market sentiment remained firmly bullish.
Analysts at Ebury suggest that a Trump victory could mean not only a resilient dollar but potentially economic growth for the United States. However, with Trump’s slate of pledges, it is a wonder that the dollar has managed to rise at all.
