The financial markets experienced major volatility as traders reacted to Donald Trump's near-certain victory in the U.S. presidential election. The dollar surged towards its largest one-day increase, with the U.S. Dollar Index advancing by 1.25% as of 0900 GMT, reaching a four-month peak.
This rise was fueled by early indications of a Republican win in key states like Georgia and Pennsylvania, which bolstered investor confidence in Trump's economic policies.
The potential for a "Red Sweep," with Republicans gaining control of both the Senate and the House of Representatives, further supported the dollar's strength. Analysts viewed Trump's proposed tax cuts and tariffs on imported goods as positive for the U.S. currency, despite concerns about inflationary pressures.
The dollar's ascent was particularly pronounced against currencies such as the Mexican peso and the Chinese yuan, with the former reaching a more than two-year high.
Simultaneously, Bitcoin reached a new all-time high, climbing as much as 9% to $75,389 before settling below $74,000. This surge was attributed to Trump's perceived support for cryptocurrencies compared to his Democratic rival, Kamala Harris. The cryptocurrency's market cap soared to $1.45 trillion, reflecting a 7.15% increase over the past 24 hours.
U.S. stock markets were also poised for gains, with futures for the Dow Jones Industrial Average rising by 956 points, or 2.2%. The S&P 500 and Nasdaq followed suit, gaining 1.9% and 1.7%, respectively.
Despite the positive market sentiment, there were concerns that higher inflation might lead the Federal Reserve to maintain interest rates at elevated levels, contrary to previous expectations of rate cuts.
James Knightley, ING's chief international economist, noted that while lower taxes could boost consumer and business sentiment in the short term, Trump's tariffs and immigration controls might pose challenges during his presidency. Deutsche Bank analysts echoed this sentiment, suggesting that a unified government under Trump would have massive fiscal policy freedom, potentially leading to a bullish outcome for the dollar.
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