The U.S dollar leaped to a 3-1/2-month high against the yen on Thursday, November 10, as markets weighed the election of businessman Donald Trump for U.S. president and how his policies could affect economic growth, Reuters reports.
However, the yen which is traditionally seen as a safe haven, dropped as low as 101.19 on Wednesday when it became clear Trump had beaten Hillary Clinton and risk assets plunged.
The dollar quickly regained its footing in choppy trade, helped in part by Trump’s acceptance speech, which focused on unity and economic growth.
The greenback surged by more than 1 percent on the day to 106.90 yen for the first time since July JPY= in a stunning rebound against a basket of major currencies .DXY, trading up almost half a percent after brief initial losses on Trump’s win.
“The dollar is taking back ground since yesterday’s election as market uncertainty was calmed by Trump’s more presidential tone in his victory speech,” Caxton FX analyst Alexandra Russell-Oliver said.
While Trump’s concilliatory tone boosted market expectations that the Federal Reserve will raise interest rates in December and supported dollar strength, markets are still struggling for a clear narrative on what the Republican’s presidency will mean for global growth.
“Nobody really knows what he is going to do and we don’t even have any idea what his advisers are thinking,” said currency strategist Lutz Karpowitz.
“Markets are waiting to see if and how he will implement some of the stranger ideas he spoke about during his election campaign. But he will definitely implement some of those ideas, which means that the current dollar strength won’t be sustained.”
Others see substantial reasons to expect more broad dollar strength next year. Trump has promised tax reform, which may draw more U.S. corporate profits home, and higher fiscal spending and growth is expected to spur inflation and boost dollar interest rates.
The Chinese yuan weakened past 6.80 per dollar in the offshore market on Thursday for the first time in more than six years on fears that Trump will act on the protectionist rhetoric that ran through his campaign, particularly regarding trade with China. The yuan eased to 6.8259 against the dollar CNH=.
