On Wednesday, the US Dollar (USD) was on track for its largest one-day increase since March 2023 against major currencies, while Bitcoin surged to an all-time high as traders grew more optimistic about a potential electoral victory for former President Donald Trump.
Trump declared himself the winner of the 2024 presidential election after Fox News announced his defeat of Democrat Kamala Harris.
While other news organizations had not yet confirmed Trump’s win, he was nearing victory, having secured key battleground states like Pennsylvania, North Carolina, and Georgia, while maintaining leads in four additional states, according to Edison Research.
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The surge in the US dollar began with early signs of a Republican win in Georgia. The dollar index, which gauges the currency against six major counterparts, climbed 1.4% to 104.85 as of 0900 GMT, having previously reached 105.31, a four-month high. This performance set the dollar on pace for its strongest day since March 2023.
Analysts view Trump’s fiscal, tariff, and immigration policies as potentially inflationary, which has contributed to rising treasury yields and strengthened the dollar.
“We’ve already seen a significant market reaction, with a sharp increase in the dollar,” said Niels Christensen, chief analyst at Nordea.
“Expectations of relaxed fiscal policies coupled with a tight labor market suggest increased inflation and leading to higher yields.”
The benchmark 10-year US treasury yield jumped 12 basis points to 4.4039%.
The dollar increased over 3% to 20.8038 Mexican pesos, reaching a level not seen in more than two years. It also rose by up to 1.3% to 7.1928 yuan in offshore trading, marking the first such gain in nearly three months.
In contrast, the onshore yuan closed the domestic trading session down 0.8% at 7.1649 per dollar, heading for its greatest daily decline since June 2023.
Mexico and China are among the nations likely to be most adversely affected by potential Trump-imposed tariffs.
The euro dropped as much as 1.9% to $1.0702, hitting its lowest point since June 28, and was last down around 1.5%. The British pound fell 1% to $1.2911.
The dollar reached 154.38 yen, its highest level since July 30, before settling at 153.92.
Japan’s Chief Cabinet Secretary Yoshimasa Hayashi stated that the government is closely monitoring foreign exchange market activities, including speculative trading, with heightened vigilance.
Bitcoin also experienced a surge, climbing as much as 8.6% to a record $75,389, before trading at about $73,756, marking a 6% increase. Traders view Trump as more cryptocurrency-friendly compared to Harris.
The Republican Party gained control of the Senate and made progress in the House of Representatives as they vied to maintain control, raising the possibility of what is being termed a “Red Sweep.”
“A potential unified government under President Trump would allow for more flexibility in fiscal policy and would likely result in a robust outlook for the dollar,” noted analysts from Deutsche Bank in a recent research report.
“Even without Congressional control, a Trump victory would still be favorable for the dollar due to the implications of tariffs, leading to particularly strong performance against high-beta currencies,” such as the Mexican peso and the Australian dollar.
The Australian dollar dipped as much as 1.87% to its lowest point in three months at $0.6513.