Dollar Hits One-Year High as Trump Nears Election Victory
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(Bloomberg) -- The dollar reached the strongest level in a year as Donald Trump looked set to clinch the US presidential race, triggering a sharp rise in Treasury yields on speculation his policies would keep US interest rates elevated.
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The greenback surged against all of its major counterparts as the rise in bond yields promised to pull cash into the US. The Bloomberg index was up as much as 1.7%, the most in four years, and hit the highest since November 2023 before the move eased.
While Trump has advocated for a weaker dollar, investors believe his policies will fan inflation and slow the pace of the Federal Reserve’s rate cuts, ultimately boosting the greenback. Trump, who is projected as the winner across pivotal swing states with his party set to control the Senate, has promised to cut taxes and slap large tariffs on imports — hurting the currencies of some of America’s biggest trading partners.
“The Trump trade has been coming good this morning,” said Jane Foley, head of FX strategy at Rabobank. “Further dollar strength remains possible if a red sweep is confirmed.”
The euro was the worst performer among the Group-of-10 currencies, down as much as 2.1%, on fears about trade tariffs hurting European growth. The yen and Swiss franc were all weaker by at least 1%, while losses in the Mexican peso hit the 3% mark. Benchmark 10-year Treasury yields rose as much as 19 basis points to 4.47%.
The US currency’s gain came on the back of a building bond-market selloff on the view that higher tariffs would stoke price pressures and lead to a less aggressive pace of rate cuts by the Federal Reserve. Markets are pricing for a total of 91 basis points of easing by June, down from around 150 basis points just over a month ago.
“Trump’s plan for tariffs and taxes should result in higher inflation and higher deficits and that should mean higher long end rates,” said Priya Misra, portfolio manager at JPMorgan Investment Management.
The close contest between Trump and Vice President Kamala Harris had elevated volatility in markets, where hedge funds and other traders plowed into so-called Trump trades — like betting against US bonds or the Mexican peso — for much of October before dialing the back this week.
A key question now is whether Republicans end up with the “trifecta,” meaning a situation where they gain control of the Senate, the House and the White House.