The U.S. dollar surged on Wednesday, set for its biggest one-day rise since March 2020, as traders responded to growing expectations of a Republican victory in the upcoming election. At the same time, Bitcoin reached a new all-time high, fueled by the rise of so-called "Trump trades," which have gained momentum as investors increasingly bet on a potential election win by former President Donald Trump.
According to projections from Edison Research, Trump led Democrat Kamala Harris by 247 electoral votes to 210, following his victory in the crucial battleground state of Georgia. A total of 270 electoral votes is needed to win the presidency. While several key states, including Pennsylvania (with 19 electoral votes), remain too close to call, the early signs were enough to trigger market movements.
The U.S. dollar's rally began with reports indicating a potential Republican win in Georgia and accelerated throughout the day. The dollar index—which tracks the U.S. currency against a basket of six major peers, including the euro and yen—rose 1.63% to 105.04 as of 06:15 GMT, reaching as high as 105.19 earlier, marking a four-month peak. This puts the greenback on track for its best day since March 2020.
Analysts attribute the dollar's strength to expectations that Trump's economic policies, including tariffs and stricter immigration controls, could be inflationary, thereby boosting the currency.
Bitcoin, meanwhile, surged as much as 8.63%, hitting a new record of $75,120. Trump's stance on cryptocurrencies is generally seen as more favorable compared to Harris, which has further supported the digital asset's climb.
"Although there are still votes left to count, as Trump nears a victory, the USD index has picked up significant momentum," said James Kniveton, senior corporate forex dealer at Convera. "Trade-sensitive currencies are likely to bear the brunt of the so-called 'Trump trade,' with markets bracing for a potentially more volatile geopolitical environment and a resurgence of the U.S.-China trade conflict."
The dollar's rally was felt across a range of currencies. It jumped as much as 3.36% to 20.7720 Mexican pesos, reaching a more than two-year high. It also rose 1.23% to 7.1860 yuan in offshore trading, marking the first time in nearly three months that the dollar had surpassed this level. Mexico and China are among the countries expected to be hardest hit by any reintroduction of Trump's tariffs.
The euro fell by 1.92% to $1.0719, its lowest since July 2, while the British pound dropped 1.35% to $1.2865. The dollar also strengthened against the Japanese yen, climbing 1.8% to 154.34 yen, the highest level since July 30.
In Congress, Republicans gained control of the Senate and made gains in the House of Representatives, raising the possibility of a "Red Sweep," in which Republicans would control both the executive and legislative branches.
"A potential unified government under President Trump would likely offer the greatest freedom for fiscal policy, making it a decidedly bullish scenario for the dollar," analysts at Deutsche Bank said in a research note. "Even without full control of Congress, a Trump victory would be significantly dollar-positive, particularly through the impact of tariffs. The greenback should especially outperform high-beta currencies like the Mexican peso and Australian dollar."
The Australian dollar, in particular, fell as much as 1.87%, hitting a three-month low of $0.6513.
As traders react to shifting political dynamics, the market remains focused on the potential economic implications of a Trump presidency and the policies that could drive further fluctuations in currency and asset prices.
Source: Daily Sabah
Bd-pratidin English/ Jisan
