The dollar continued its wild ride on Wednesday, still boosted by the prospect of inflationary policies during Donald Trump’s second term, likely to keep rates high in the United States. Around 8:35 p.m. GMT, the American currency gained 0.56% against the single currency, at 1.0563 dollars per euro. The Dollar Index, which compares the greenback to a basket of six currencies, was at its highest level in more than a year. “The movement (of the dollar) is impressive”observed Adam Button of ForexLive to AFP.
The greenback is catapulted by the announced return of Donald Trump to the White House, and by the prospect of inflationary policies included in the Republican candidate’s program, such as tax cuts or increased customs duties. With inflation having slowed significantly in the United States, the Fed had recently begun to ease its monetary policy, but the return of Donald Trump calls into question this movement to lower rates. “We believe the Fed will adopt a cautious tone going forward, particularly in light of what we see as heightened inflation risks during a second Trump term.”underlined analysts at Brown Brothers Harriman.
Resilient US economy
Furthermore, “looking at the bigger picture, market players are looking ahead to 2025 and trying to assess where growth could be stronger”commented M Button. Given the recovery measures considered disappointing in China and the numerous political and economic uncertainties in Europe, the image of a more resilient American economy could influence the market, according to the analyst. “The United States is the only place where you can get surprising growth” et “there are reasons to believe that American exceptionalism can endure”next year,” he added.
At the same time, the yen continued to depreciate against the dollar on Wednesday due to an increase in the gap between Japanese and American bond yields. The latter are boosted by the anticipation of an increase in public deficits in the United States after Trump’s victory. Around 8:35 p.m. GMT, the Japanese currency fell 0.62% against the American currency, to 155.58 yen per dollar, shortly after hitting its lowest since the end of July, at 155.62 yen.
Canada
