With Donald Trump in the U.S., Britain could cozy up to the U.S. once it triggers Brexit negotiations.
Following the surprising win of Donald Trump, the USD has climbed to its 9 month high against a basket of major currencies. The rise has been on the back of expectations that Trump’s administration will boost public spending which will trigger a rise in inflation, which in turn spurred a rise in U.S Treasury bonds.
The dollar index rose by 0.4% to 99.471 after touching 99.680, its highest since Jan. 29, 2016.
In Asia, the 10-year Treasury bond yields rose to their 10-month high of 2.2%.
“What was expected to be a gradual dollar rise is going much faster than expected after Trump’s win,” said Koji Fukaya, president of FPG Securities. “With the possibility of reflationary policies being enacted, the market is bracing for a new bull phase under a different set of rules.”
He went on to add, “While the dollar rise before the U.S. election was driven to a large degree by speculators unwinding their positions, this phase is more conducive for participants to go long on the dollar anew”.
The surprise victory has lifted the cloud of risk aversion in equity markets in the U.S. and Japan. On Friday, the Dow Jones closed at a record high, while Japan’s Nikkei was rose by 1.5% today.
“It is probably a good idea to keep riding the dollar higher while the Trump camp has not yet revealed any specific policy steps,” said Masafumi Yamamoto, chief forex strategist at Mizuho Securities in Tokyo.
“The euro could be more easily exposed to negative pressure amid concerns that the win by Trump, with his anti-globalism agenda, could affect referendums and elections in Italy, Holland and France next year.”
As for the euro, it was down by 0.6% at $1.0793 having touched $1.0773, its lowest since early January.
The Australian dollar and was seen at $0.7548 having touched its 1 month low of $0.7524.
As for the New Zealand dollar, it was down by 0.5% to $0.7092 with the market waiting to see how the impact of the earthquake will affect the economy.
After Trump’s win, currencies associated with the Trans Pacific Partnership, (TPP), including the Kiwi and the Aussie, came under increased pressure following the news that the outcome of the election has effectively rendered the trade deal as a non-starter for the U.S. Congress.
Trump had made the TPP, a centrepiece of his election campaign.
The pound retreated against the greenback by 0.3% to $1.2566.
After Trump’s win, the market’s focus on Brexit shifted to expectations that Trump could strengthen historic ties with Britain, and the pound hit its 5 week high of $1.2673 last week.