(Update: Price updates, election results updates, analyst comments)
PARIS (Agefi-Dow Jones)–The dollar is taking off. This is one of the first consequences on the markets of Donald Trump's victory in the presidential election.
The DXY index, which measures the evolution of the dollar against a basket of currencies, gained 1.5% this Wednesday around 11:25 a.m. to reach 104.95, after a peak close to 105.25 earlier in the morning. Such a level of DXY had not been observed since last July.
At the same time, the euro fell by 1.6% against the greenback to $1.0762.
The dollar also rose against the yen by 1.5% to 153.91.
In the rest of Asia, the same trend is emerging. The Singapore dollar was down 1.2% against the US dollar around 11:25 a.m., when the Thai baht lost 1.8%, the South Korean won fell by 1.3% and the Malaysian ringgit fell by 1. .3%.
“The US dollar is rising in foreign exchange markets, boosted by the combination of higher US bond yields and the anticipation of a significant inflow of capital into US listed and unlisted markets,” said Stephen Dover, director of Franklin. Templeton Institute at Franklin Templeton.
An inflationary trade policy
According to the AP news agency, Donald Trump won the presidential election. The Republican candidate has already won 277 voters, compared to 224 for his Democratic rival Kamala Harris. It takes 270 electors to win. At the same time, the Republican Party regained control of the Senate in the United States, one of the two chambers of Congress.
As for the House of Representatives, the result is currently uncertain and neither party has taken a real lead.
Donald Trump's victory in the White House should lead to a more aggressive trade policy from the United States towards China and Europe, with a significant increase in customs duties. A policy which, coupled with a limitation on immigration, is judged to be inflationary by economists. This should lead to higher interest rates in the United States, all things being equal, with less incentive for the Fed to reduce its key rates. As a result, this will penalize the currencies of the United States' trading partners.
“If Republicans win both houses of Congress and the White House, we expect a more dynamic U.S. economy, with growth above potential and inflation above the Federal Reserve's target. Interest rates should then be higher than pre-election forecasts”, summarizes Samy Chaar, chief economist at Lombard Odier.
Structural factors
Two structural factors reinforce the dominance of the greenback, according to a note published Wednesday by William Gerlach, vice-president of iBanFirst. The American economy outperforms that of other developed countries. “We forecast growth of 2.7% this year in the United States, while it could reach at most 1.2% in the euro zone,” underlines William Gerlach. “The growth trajectory of the United States is unique in a world of low growth,” he judges.
Furthermore, the dollar being the only true global reserve currency, this pushes foreign investors to buy Treasury bonds despite the country's significant deficit.
The second factor is linked to the American markets, which is “the best performing of the developed markets in the world and now represents 50% of global market capitalization”, underlines William Gerlach. Led by tech giants like Apple, Microsoft, Nvidia and Google, the American stock market attracts the savings of foreign investors, with massive flows of capital entering the United States. Which weighs upward on the dollar.
“Historically, the surplus of emerging countries has always been directed towards the United States. What is more surprising is that this phenomenon now also affects Europe,” he points out.
-Jean-Louis Dell'Oro, Agefi-Dow Jones ; [email protected] ed: LBO – VCA
Agefi-Dow Jones The financial newswire
(END) Dow Jones Newswires
November 06, 2024 06:47 ET (11:47 GMT)
