FX Focus: Dollar extends rally as calm returns following Trump’s win

FX Focus: Dollar extends rally as calm returns following Trump’s win

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Dollar rallies more than 1% against the yen and gains against its major rivals, while pound climbs above €1.14.

The dollar rallied on Thursday (10 November), recovering from the losses it recorded in the previous session, as calm returned to global markets after the shock triggered by Donald Trump’s surprise win in the US elections.

The greenback had taken a hit 24 hours earlier, as it became apparent the Republican candidate would win the election, falling as much as 3.5% against the Japanese yen, before recovering during the day.

Those gains were extended on Thursday, as the US currency jumped more than 1% against the yen, trading at ¥106.76. The dollar also gained 0.46% and 0.30% against the Canadian dollar and the Swiss franc, exchanging hands at CAD$1.3484 and CHF 0.9880 respectively.

The greenback was also 0.18% higher against the euro and 0.26% higher against its Australian counterpart, fetching 0.9157 euro cents and AUD$1.3107 respectively.

Ahead of the elections, economists had warned a Trump presidency would almost certainly postpone an interest rates hike from the Federal Reserve, which would in turn weigh on the dollar. However, in his acceptance speech, the president-elect struck a more conciliatory tone than many expected, which fueled speculations the Fed will go ahead and raise interest rates next month.

“The trajectory of rate hikes will be even faster if Trump decides to deliver on his promises, which will spur inflation expectations,” said FXTM chief market strategist Hussein Sayed.

James Hughes, chief market analyst at GKFX, however, warned against reading too much into the recent dollar rally, suggesting it was too soon to determine whether it would last.

“The natural economic reaction to the prospect of a rate hike would be a stronger dollar and weaker equities, however, really what we are seeing is going against the natural expectations, this is in relief more than anything,” he said.

Meanwhile, the pound recorded modest gains, climbing 0.13% against the dollar and 0.33% against the euro, to trade at $1.2420 and €1.1406 respectively.

“With the Bank of England now neutral and UK data remaining surprisingly strong despite these uncertain times, the pound/dollar could stage a more meaningful comeback, though we are unlikely to see $1.40s or $1.50s any time soon,” said Fawad Razaqzada, market analyst at Forex.com.

 

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