0747 GMT – Trump trades have boosted the dollar across the board and put the yuan under pressure, ING strategists say. Markets are pricing in renewed trade wars, ING’s Chris Turner says. In its pre-election analysis, ING thought that something like 7.30 would be the best case for onshore USD/CNY under a scenario where Trump wins and Chinese authorities don’t allow further depreciation. ING thinks Chinese authorities won’t allow the currency to devalue as they did in summer 2019 and will instead play the long game, “keeping the renminbi as a store of value to compete on the world stage,” Turner says. USD/CNY is last up 0.8%; USD/ CNH is up 1.05%. ( fabiana.negrinochoa@wsj.com )
Dollar Hits 4-Month High on Trump Trade
0741 GMT – The dollar rises to a four-month high as investors position for the prospect of Donald Trump winning the U.S. presidential election. The so-called “Trump trade” is in full swing as the election results are pointing towards a favorable outcome for the former President, Swissquote Bank analyst Ipek Ozkardeskaya says in a note. The Trump trade are bets that his proposed policies, including lower taxes and trade tariffs, will be inflationary and lead to higher interest rates. The DXY dollar index rises to a high of 105.311. The euro falls to a four-month low of $1.0704, according to FactSet. ( renae.dyer@wsj.com )
Dollar’s Election-Fueled Rally Stings Trade-Sensitive FX
0558 GMT – The greenback has rallied across the board as U.S. election results strengthen the bull case for USD, says Pepperstone’s Michael Brown . The dollar index gained as much as 1.5% in its biggest jump since March 2020, vaulting north of 105, Brown says. All G-10 currencies trade well over 1% softer, but trade-sensitive FX has been hardest hit. “Nowhere is this more obvious than the MXN, which has slumped almost 3% to its weakest in a couple of years,” the strategist says. USD/MXN is ripping toward the 21 handle amid concern that a Trump win will renew trade barriers with Mexico. CNH has also slumped, though Brown notes market chatter that domestic banks have been selling USD offshore to prop it up to some degree. USD/MXN at 20.71; USD/CNH at 7.18. ( fabiana.negrinochoa@wsj.com )
‘Red Sweep’ Could Ramp Up Pressure on CNH
0537 GMT – USD/CNH has surged nearly 1.2% so far this session amid strong USD demand, says Pepperstone’s Dilin Wu. Betting odds are now overwhelmingly in Trump’s favor, Wu says. The market reaction to potential tariffs and concerns over U.S. reflation are driving up the greenback. Two things will shape the USD/CNH trajectory in the coming days: if Republicans secure control of the House and China’s response to the election, the strategist says. A “red wave” in the U.S. would bring legislative and budgetary ease for policy that could hurt China’s export-dependent economy. That will intensify selling pressure on CNH, Wu expects. If Trump faces a split Congress, budget delays could temper policy impact, leading to reduced ‘short China’ positions and supporting CNH.( fabiana.negrinochoa@wsj.com )
Trump Win Could Trigger Emerging-Market FX Selloff; Mexican Peso Most Exposed
0528 GMT – A Trump victory will likely prompt a widespread selloff in emerging-market currencies, with the Mexican peso likely to be the worst hit, says BMI, a Fitch Solutions company. After Trump’s surprise win in 2016, 57 out of the 61 most widely traded currencies lost ground against the dollar, it notes. The Mexican peso weakened 11% in the immediate aftermath and hit 22 to the dollar, a new low at the time, it says. BMI expects a Trump win this time to cause the peso to weaken about 9% to 22 against the dollar by end-2024. If Trump enacts protectionist proposals, the peso could drop toward its all-time low of 25 to the dollar. USD/MXN rises 2.4% to 20.58 after hitting a high of 20.77 earlier as Trump takes an early lead. ( farah.elias@wsj.com )
