US Dollar Continues To Do Well Against Major Currencies

US Dollar.The US Dollar has surged to 11-month high figure after the recent win of Donald Trump in the Presidential elections of USA. There is an upward trajectory retained by the currency on the back of higher US bond yields and chances of increased inflations after the recent victory of Trump in the elections.

The rally of the dollar has been seen across all the major currencies in the world. Since its launch in 2010, the Yuan currency has fallen to its lowest. At the same time, Yen and Euro have dropped to a fresh low for this year. Currencies of different nations that are involved in Trans-Pacific Partnership or namely TPP are experiencing a lot of pressure because the new President has shown displeasure to the trade treaty.

There is a full percentage fall in the Euro currency to $1.07285 which was later on settled at $1.0766. There is an increase in 10 years yield by 11 basis points thereby reaching 2.3 percent in Europe which is a high figure in 10 months.

The Daily Conversation

Jane Foley who is the strategist of Rabobank has made the following statement:

I think people were just pausing for breath. The rise higher in yields, coupled with the fact that people have been reducing dollar longs for most of this year, has really played into this. It is really setting the tone for all other markets.

The main motive for these currency movements is the fact that the market is anticipating that the administration of Trump will boost spending and introduce a new set of restrictions on trade. The inflation will be properly controlled by these moves thereby putting an end to low rate inflation which has prevailed in developing countries. Masafumi Yamamoto, who is a chief forex strategist at Mizuho Securities in Tokyo, has said that the dollar will continue to remain high even in the absence of new policy measures from Donald Trump.

The analysts at Deutsche Bank anticipate that the dollar will hit the target of $1.05 per Euro by the end of this year. George Saravelos, who is a strategist at Deutsche Bank, believes that the greenback was approaching a sweet spot in the rally.

There is still doubt and uncertainties what the new administration of Donald Trump will mean for other world economies. For the time being, it has removed the pressure on the safe harbour currency yen thereby helping the Bank of Japan. Lee Hardman who is a currency analyst says there are more restrictions on trade and the currency rates of USD/JPY will be boosted by higher US yields.

For China, markets are still betting on the currency and the experts believe that they are not examining the underlying situation. With the debt of China remaining high, Foley pointed out that there will be no understanding as to how the government of China will respond to US Trade protectionism. According to him, the markets have ignored the possible tactics that Beijing will start adopting to the sale of US Treasuries.


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