Dollar on track for weekly gain after Trump election win
US currency may consolidate on uncertainty over Trump policies
Japanese yen suffers from widening interest rate differential
Updated at 14:40 EST
By Karen Brettell and Stefano Rebaudo
Nov 8 (Reuters) -The dollar rose on Friday and was heading for a weekly gain as investors evaluated the likely impact on the American economy of Tuesday’s election of Republican Donald Trump as U.S. president.
Analysts expect Trump's policy proposals -- including more trade tariffs, a clampdown on illegal immigration, lower taxes and business deregulation -- willboost growth and inflation.
But in the near term there remains considerable uncertainty over what policies will actually be introduced.
“We don't really know how much was campaign rhetoric, how much is a negotiating position, how much of it is speaking principle,” said Marc Chandler, chief market strategist at Bannockburn Global Forex in New York. “Part of the volatility we're seeing in the dollar and in interest rates is that the market is trying to figure it out.”
Republicans also won control of the Senate and are leading the race for the House of Representatives, with some races stillto be called.
The dollar index =USD jumped to a four-month high of 105.44 on Wednesday, but has dipped since, partly due to profit-taking. It was up 0.58% on the day at 105.01on Friday and on pace for a 0.68%weekly increase.
Data on Friday showed that U.S. consumer sentiment rose to aseven-month high in early November, in a survey taken before the election.
The next major U.S. economic release will be Wednesday's consumer price data for October.
"We need more clarity about U.S. policies," said Athanasios Vamvakidis, global head of forex strategy at Bank of America. "Until then, the greenback will be trading (on) data and expectations for the Fed easing path."
On Thursday, the Federal Reserve cut rates by 25 basis points, which had been widely expected. Chair Jerome Powell said the U.S. central bank would not speculate on the impact of any policies by the incoming U.S. government.
Traders are pricing in 65% odds that the Fed will cut again by 25 basis points in December, down from 83% a week ago, according to the CME Group’s FedWatch Tool.
The euro EUR= dropped 0.85% to $1.0712and was headed for a 1.12%decline for the week, which saw the collapse of Germany's coalition government on Wednesday.
Against the Japanese currency, the greenback fell 0.13% to 152.73yen JPY=.
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 rates as soon as December to prevent the currency from sliding back toward three-decade lows.
China's yuan weakened after Beijing unveiled a 10 trillion yuan ($1.4 trillion) debt package on Friday to ease local government financing strains and stabilize flagging economic growth.
"Markets may have been hoping for a larger-than-expected stimulus," said Lynn Song, chief economist for Greater China at ING.
The offshore yuan CNH= was last down 0.69% at 7.2 per dollar.
The Australian dollar AUD=, often used as a liquid proxy for its Chinese counterpart, fell 1.53% to $0.6576.
Bitcoin BTC= was last up 1.45% at $77,068, after earlier reachinga record $77,303.97.
Trump is expected to enact a more favorable regulatory environment for the crypto industry.
US inflation and interest rates https://reut.rs/40IBGZH
Reporting by Karen Brettell and Stefano Rebaudo; editing by Jonathan Oatis and Leslie Adler
Related Assets
Latest News
Disclaimer: The XM Group entities provide execution-only service and access to our Online Trading Facility, permitting a person to view and/or use the content available on or via the website, is not intended to change or expand on this, nor does it change or expand on this. Such access and use are always subject to: (i) Terms and Conditions; (ii) Risk Warnings; and (iii) Full Disclaimer. Such content is therefore provided as no more than general information. Particularly, please be aware that the contents of our Online Trading Facility are neither a solicitation, nor an offer to enter any transactions on the financial markets. Trading on any financial market involves a significant level of risk to your capital.
All material published on our Online Trading Facility is intended for educational/informational purposes only, and does not contain – nor should it be considered as containing – financial, investment tax or trading advice and recommendations; or a record of our trading prices; or an offer of, or solicitation for, a transaction in any financial instruments; or unsolicited financial promotions to you.
Any third-party content, as well as content prepared by XM, such as: opinions, news, research, analyses, prices and other information or links to third-party sites contained on this website are provided on an “as-is” basis, as general market commentary, and do not constitute investment advice. To the extent that any content is construed as investment research, you must note and accept that the content was not intended to and has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such, it would be considered as marketing communication under the relevant laws and regulations. Please ensure that you have read and understood our Notification on Non-Independent Investment. Research and Risk Warning concerning the foregoing information, which can be accessed here.
