Following Donald Trump’s presidential victory, the US dollar has surged to its highest level in a year. According to data released on Monday, the dollar continued to show strength after rising for six consecutive trading days, buoyed by robust growth in the US economy.
The Bloomberg Dollar Spot Index rose by 0.7%, reaching its highest level since November 2023. Traders are betting that Trump’s trade policies will bolster the dollar by putting pressure on major currencies, especially the euro. The euro traded at $1.0657, down 0.6% against the dollar, prompting speculation on whether it could reach parity with the dollar.
The dollar also received support from the Federal Reserve, which lowered its benchmark interest rate by 0.25 percentage points last week. The central bank avoided providing clear guidance on the timing and pace of further rate cuts.
Paresh Upadhyaya, head of fixed income and currency strategy at Amundi US Inc., explained that several factors are expected to support the dollar in the near future. He noted that the market is beginning to take the risks associated with tariffs and the implications of both global and domestic growth and inflation outlooks more seriously.
Jane Foley, head of FX strategy at Rabobank, noted that Trump’s election will affect both the euro and the Fed’s rate-cutting cycle. She predicted the euro could fall to $1.05 within three months.
The Republican Party is projected to secure control of both the Senate and the House, which may enable President Trump to implement his planned tax cuts, immigration reforms, and trade policies and secure nominations for his chosen candidates.
Conversely, weakening economic growth in other parts of the world pressures central banks to lower borrowing costs, which is weighing on local currencies. For example, the yen has recorded the worst performance among major currencies.
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