The dollar saw broad gains on Monday, buoyed by speculation of a potential Donald Trump victory in the upcoming U.S. elections following an attempted assassination of the former president during a campaign rally in Pennsylvania.
Trump, 78, sustained injuries to his right ear from the incident, prompting investors to adjust expectations towards a higher likelihood of his re-election in November. This sentiment bolstered both the dollar and U.S. Treasury yields, alongside a surge in cryptocurrencies.
Vasu Menon, managing director of investment strategy at OCBC, noted, “Sympathy votes could increase the odds of a Trump victory as more of his supporters may now feel the need to turnout at polling booths in November to vote for him.”
Online betting site PredictIT reflected this shift, with Republican win odds rising to 66 cents from 60 cents on Friday, while Democrats fell to 38 cents. This suggests Republicans are now perceived as twice as likely to win the election.
Against other currencies, the euro and sterling weakened against the dollar, while the greenback strengthened against the Norwegian and Swedish crowns.
“A bias for a supported, possibly even stronger, USD is likely to play out if the U.S. heads into Trump 2.0,” commented Vishnu Varathan, chief economist for Asia ex-Japan at Mizuho Bank, attributing this to geopolitical factors rather than intrinsic dollar strength.
Long-dated U.S. bond yields rose on expectations of policies under a Trump administration that could drive up government debt and inflation, with the 10-year Treasury yield increasing to approximately 4.2158%.
In the cryptocurrency market, bitcoin surged by about 5% to $62,997, while ether jumped nearly 6% to $3,368.14, bolstered by Trump’s supportive stance towards digital currencies.
Meanwhile, economic data from China showed slower-than-expected growth in the second quarter, contributing to market concerns. The Chinese yuan edged lower to 7.2626 per dollar amid ongoing economic challenges despite government efforts to stabilize the property market and boost consumer confidence.
The yen, which had previously strengthened, retraced some gains from last week but remained near recent highs, reflecting market uncertainty amid interventions by Japanese authorities to support the currency.
Overall, geopolitical developments surrounding the U.S. elections and economic indicators from China continued to influence global market sentiment, shaping investor strategies in currencies and digital assets alike.
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