Washington: The US dollar rose to an 11-month high against other major currencies, as US President-elect Donald Trump’s potential economic policies boosted market expectations of further interest-rate increases.
The dollar index, which tracks the greenback against six major peers, was up 1.05% to 100.100 in late trading on Monday, the highest in 11 months and also the first time to exceed 100 this year, Xinhua news agency reported.
Analysts had predicted a rout in the greenback after Trump’s in the November 8 presidential election may cause more instabilities in financial markets than his Democratic counterpart Hillary Clinton, who was seen as more predictable and was expected to follow President Barack Obama’s steps in regulating the financial sector.
The dollar index slumped more than 1% on the election night as the presidential race tightened. It then pared losses and increased for four consecutive sessions till Monday.
“The dollar rally is connected to US interest rates going up,” said Robert Savage, CEO of CC Track Solutions, in an interview with Xinhua on Monday.
He added that the rate move reflects Trump’s election and expected a policy shift to lower taxes and more spending leading to higher growth and inflation.
“This means we see a Federal Reserve rate hike in December and March.” He said.
Analysts said the market has shifted its focus from the uncertainty of US presidential election to economic prospects under a Trump administration: the rising possibility of tax cuts and a generally pro-growth set of policies, aided and abetted by the Republican clean sweep of Congress, raised market speculation for a revival in inflation as well as more rate hikes in the future.
Earlier this month, the Fed left interest rates unchanged amid uncertainty about market reactions to the outcome of the election, but signalled that it could raise rates again as soon as in December.
Analysts pointed out that the possibility of market volatility still remains even though a rate hike in December is almost guaranteed.
First Published | 15 November 2016 11:12 AM