Authors: Karen Brettell and Stefano Rebaudo
(Reuters) – The dollar rose on Friday and was heading for a weekly gain as investors assessed the likely impact on the U.S. economy of Tuesday’s election of Republican Donald Trump as U.S. president.
Analysts expect Trump’s policy proposals – which include higher trade tariffs, curbs on illegal immigration, lower taxes and business deregulation – to spur economic growth and inflation.
However, in the near term, there remains significant uncertainty about what policies will actually be implemented.
“We don’t really know how much of it was campaign rhetoric, how much of it was a negotiating position, and how much of it was talking principles,” said Marc Chandler, chief market strategist at Bannockburn Global Forex in New York. “Part of the volatility we’re seeing in the dollar and interest rates is the market trying to figure it out.”
Republicans also won control of the Senate and are leading in the House race, with some races still undecided.
The stock hit a four-month high of 105.44 on Wednesday, but has since fallen, partly due to profit-taking. It rose 0.58% to 105.01 on Friday and continued at a weekly gain of 0.68%.
Friday’s data showed U.S. consumer sentiment rose to its highest level in seven months in early November, according to a pre-election survey.
The next crucial economic publication in the US will be Wednesday’s data on consumer prices for October.
“We need more transparency in U.S. policy,” said Athanasios Vamvakidis, global head of forex strategy at Bank of America. “Until then, the dollar will be guided by data and expectations regarding the Fed’s monetary easing path.”
On Thursday, the Federal Reserve cut interest rates by 25 basis points, which was widely expected. Chairman Jerome Powell said the U.S. central bank would not speculate on the impact of any policies of the up-to-date U.S. government.
According to CME Group’s FedWatch Tool, investors are pricing in a 65% chance of another 25-basis-point rate cut in December, up from 83% a week ago.
The euro fell 0.85% to $1.0712 and was headed for a 1.12% decline in a week that saw the collapse of Germany’s coalition government on Wednesday.
Against the Japanese currency, the dollar fell 0.13% to 152.73 yen.
The yen is expected to suffer as the interest rate differential with the United States widens, which could prompt Japan’s central bank to raise interest rates as early as December to prevent the currency from returning to three-decade lows.
weakened after Beijing unveiled on Friday a 10 trillion yuan ($1.4 trillion) debt package aimed at easing local government financing strains and stabilizing flagging economic growth.
“Markets may have been hoping for stronger-than-expected stimulus,” said Lynn Song, ING’s chief economist for Greater China.
It was recently down 0.69% at 7.2 per dollar.
The Australian dollar, often used as a floating proxy for its Chinese counterpart, fell 1.53% to $0.6576.
recently rose 1.45% to $77,068, after previously hitting a record high of $77,303.97.
Trump is expected to introduce a more favorable regulatory environment for the crypto industry.
