Authors: Kevin Buckland and Harry Robertson
TOKYO/LONDON (Reuters) – The U.S. dollar rose to a four-month high against major peer markets on Tuesday, while bitcoin extended its record rally as investors continued to flock to trades seen as benefiting from Donald Trump’s incoming administration.
The euro hit a seven-month low and the yuan fell to its lowest level in more than three months, with Europe and China targeted by potential Trump tariffs.
Leading cryptocurrency Bitcoin hit a modern all-time high of $89,982, with the latest being $88,561. Trump has promised to make the United States the “crypto capital of the planet.”
“We are now in a regulatory tailwind zone,” said Gautam Chhugani, an analyst at research firm Bernstein. “We expect a crypto-friendly regulatory environment under Trump, starting with the pro-crypto SEC (Securities and Exchange Commission).”
The index, which measures the currency against six other currencies, rose 0.34% to 105.78, near its highest level since early July.
“The market continues to pressure US equities, US interest rates and the dollar higher,” said Alvin Tan, head of Asia FX strategy at RBC Capital Markets.
“The impetus today is probably the fact that we have received reports that Trump intends to nominate Senator Rubio as well as Congressman Waltz as key foreign policy officials, and they are known to be quite hawkish on China.”
On Monday, sources told Reuters that Trump is expected to choose U.S. Sen. Marco Rubio as his secretary of state, perhaps the most hawkish option on the shortlist. Sources say Republican Rep. Mike Waltz, a critic of China, is expected to be national security adviser.
“This suggests that Trump is serious about some of his tough policy proposals,” Tan added.
It ended the domestic session at 7.2378 per dollar, the lowest level since August 1.
The dollar – which is usually influenced by the economic outlook of China, Australia’s main trading partner – fell 0.44% to $0.6545.
The euro fell to $1.0617 on Tuesday, its lowest level since behind schedule April, and was last down 0.26% at $1.0627.
Trump’s Republican Party will control both houses of Congress when he takes office in January, the Decision Desk predicted Monday. This would enable him to push forward a plan to cut taxes and shrink the federal government.
Trump warned that the euro bloc would “pay a high price” for insufficient purchases of US exports, with cars being a particular target. He threatened China with across-the-board 60% tariffs.
Potentially inflationary tariffs and immigration policies have caused markets to reduce the likelihood of the Federal Reserve cutting interest rates by a quarter of a point on December 18 to 69% from nearly 80% a week ago, according to CME Group’s (NASDAQ:) FedWatch Tool.
The euro is feeling additional pressure resulting from political uncertainty in the bloc’s largest economy, Germany. The Greens, Chancellor Olaf Sholz’s remaining coalition partner, joined opposition calls on Monday for an early vote in parliament to open the way to early elections.
Sterling fell 0.38% to $1.2822 after data showed regular UK wage growth slowed and unemployment rose, with the pound also feeling the heat from a rising dollar.
The dollar rose about 0.15% to 153.94 yen. Last week, the Japanese currency fell to a three-month low of 154.715 per dollar.
