US dollar buffered by Trump policy expectations; Bitcoin surges
The greenback rallies more than 2% since the US presidential election on Nov 5
THE US dollar steadied on Thursday (Nov 21) as traders awaited clarity on US President-elect Donald Trump’s proposed policies amid an uncertain outlook for interest rates, while Bitcoin forged towards US$100,000 for the first time.
Bitcoin has been on a blistering rally in the past few weeks on speculation that Trump will create an easier regulatory environment for cryptocurrencies.
It hit a record high of US$97,902 on Thursday, underpinned by a report that Trump’s social media company was in talks to buy crypto trading company Bakkt. It was last up 3.8 per cent at US$98,050.
The US dollar index was up 0.1 per cent at 106.72 – not far off last week’s one-year high of 107.07.
“The US is still the main driver, really. It feels a bit of a risk-off morning. The yen is the main winner so far, and I think that’s this week, with Ukraine at front and centre at the moment,” IG chief strategist Chris Beauchamp said, referring to an escalation in the conflict between Ukraine and Russia.
The euro, one of the main casualties of the dollar’s post-election ascent, was down 0.2 per cent at US$1.0518.
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European leaders and policymakers have been grappling with the potential ramifications of Trump’s proposed tariff hikes, while political uncertainty in the region’s largest economies – Germany and France – has been adding to that mix.
Marine Le Pen, the French far-right leader, on Wednesday threatened to seek to topple French Prime Minister Michel Barnier’s fragile coalition government if her National Rally party’s cost-of-living concerns were not incorporated into the 2025 Budget.
“There are enough things to be concerned about to just tilt people towards being more cautious at the moment,” Beauchamp said.
The seemingly unstoppable US dollar has been helped by sharp swings in expectations for US interest rates. The market currently sees just a 54 per cent chance of a cut from the US Federal Reserve next month, down from 82.5 per cent only a week ago, indicated CME’s FedWatch tool.
A Reuters poll showed that most economists expect the Fed to cut rates at its December meeting, with shallower cuts in 2025 than expected a month ago, due to the risk of higher inflation from Trump’s policies.
The US dollar has rallied more than 2 per cent since the US presidential election on Nov 5, driven by an expectation that Trump’s proposals on raising trade tariffs and cutting taxes could reignite inflation and limit the Fed’s ability to cut rates.
At the same time, traders are sizing up what Trump’s campaign pledges of tariffs mean for the rest of the world, with Europe and China both likely in the firing line.
“Right now, we are kind of stuck in a wait-and-worry zone because Trump is in the midst of forming his Cabinet,” said Sim Moh Siong, currency strategist at Bank of Singapore.
“There’s a lot of things that are missing there in terms of understanding”, including the timing and magnitude of policies, and those details will not be known for a couple of months or so, he added.
Elsewhere, Ukraine fired a volley of British Storm Shadow cruise missiles into Russia on Wednesday, the latest new Western weapon it has been permitted to use on Russian targets. This came a day after it fired US ATACMS (Army Tactical Missile System) missiles.
Russia fired an intercontinental ballistic missile during an attack on the Ukrainian city of Dnipro on Thursday, Kyiv’s air force said.
With geopolitical tensions running high, the Japanese yen has outperformed. The US dollar was last down 0.5 per cent on the day at 154.585 yen.
The yen has lost around 10 per cent in value in the last couple of months, as traders have bet heavily in favour of the greenback, given the chances that US rates will remain well above Japanese ones for some time.
Bank of Japan (BOJ) governor Kazuo Ueda said on Thursday that the central bank would “seriously” take into account foreign exchange rate moves in compiling its economic and price forecasts.
He noted that there was still a month to go until the BOJ’s next policy meeting in December, adding that there would be more information to digest by then.
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