On Monday, the U.S. dollar saw a decline as investors moved away from positions that had gained from the anticipation of a potential victory by former President Donald Trump in Tuesday’s election.
Vice President Kamala Harris has gained ground in some polls, though the race remains close. Election betting sites also show Harris advancing, with a lead on PredictIt, though Polymarket continues to favor Trump. Analysts believe that Trump’s policies on tariffs and immigration could drive inflation, possibly lifting longer-term U.S. Treasury yields and the dollar. Schamotta added that tariffs and uncertainty surrounding Trump’s policies could also negatively impact other global currencies.
The dollar index dropped by 0.24% to 103.69 by Monday’s close. The euro rose by 0.6% to $1.0899, while the dollar weakened by 0.76% against the Japanese yen, settling at 151.82 yen. One-week implied volatility options for the euro-dollar pair reached levels not seen since March 2023. Meanwhile, the offshore Chinese yuan climbed 0.53% to 7.102 per dollar, and the Mexican peso strengthened 1.49% to 19.992, recovering from recent declines driven by tariff concerns under a possible Trump administration.
Volatility for the yuan reached record highs, while dollar/Mexican peso volatility was at its highest since April 2020. Bitcoin also dropped by 1.21% to $68,359, as Trump is seen as more favorable to cryptocurrency policies than Harris. The Federal Reserve is expected to lower rates by 25 basis points following its two-day meeting concluding on Thursday, and investors will closely watch for any signals that the central bank might pause further cuts in December.
- Tags: Fed rate, U.S dollar, U.S election
