On Thursday, November 4, the US dollar continued its strong rally, reaching a new high against major currencies. This surge comes as a result of rising yields and Donald Trump’s victory in the US presidential election, leading the dollar to rise for the fifth consecutive trading day.
According to Reuters, the dollar broke through 156 yen for the first time since July, while the euro fell to its lowest level since November 2023, closing at $1.05310, down 0.32%. The pound also hit a low of $1.2630 against the dollar for the first time in four months.
Nick Rees, a currency strategist at Monex Europe, stated, “It’s all about the dollar and Donald Trump. That’s the story in the forex market.”
The incoming Trump administration is expected to implement tax cuts and deregulation. After the Federal Reserve cut interest rates by 25 basis points last Thursday (November 7), they are expected to pursue a cautious policy.
These factors, coupled with expectations of deeper deficit spending and short-term economic growth, are pushing up bond yields, providing additional support for the dollar.
The benchmark 10-year bond yield reached 4.483% on Thursday, the highest level since July.
According to a forecast by the US data and polling company Edison Research on Wednesday, when President-elect Trump takes office in January, the Republican Party will control both houses of Congress, giving him broad power to advance his agenda.
The dollar index, which measures the dollar against six major currencies including the euro and yen, rose 0.3% to 106.79 and briefly touched 107, reaching its highest level since early November 2023.
On Wednesday, the US Consumer Price Index (CPI) met economists’ expectations, causing a brief dip in the dollar subsequently. This led traders to see it as a buying opportunity, as the Federal Reserve may still consider a rate cut at its December meeting.
In an early morning report, ING analysts stated, “We believe the price action this week has given us a taste of what to expect in the forex market under Trump’s second term. Like yesterday, the temporary adjustment of the dollar following the US Consumer Price Index release is seen as an opportunity to establish a structural bullish position on the dollar at more attractive levels.”
Cryptocurrency Bitcoin surged overnight to a historic high of $93,480, then briefly retraced before moving back up to that level on Thursday. Trump has promised to make the US the “global capital of cryptocurrency.”
In other news, the Australian dollar dropped to a three-month low of $0.6464 after slightly disappointing job data, but investors believe the report is not weak enough to change the Reserve Bank of Australia’s stable policy outlook.
The Swiss franc continues to be under pressure against the dollar, rising 0.4% to $0.8897, but as a safe-haven currency in the Alps, the franc has strengthened against the euro. The euro closed at 0.9371 francs, just steps away from a three-week low reached on Wednesday.