The cryptocurrency bitcoin hit a three-month high in early Asian trading on Monday and the dollar looks set to extend its gains as markets countdown to the US presidential election in two weeks.
Election polls show former President Donald Trump‘s chances of winning the Nov. 5 election are increasing and are boosting the dollar, as his tariff and tax policy proposals are seen as likely to keep consumer interest rates high. United States and to undermine the currencies of trading partners.
Currency movements in major markets last week were driven by the European Central Bank’s dovish rate cut and strong U.S. data that pushed away expectations about how quickly U.S. rates can fall, particularly if Trump wins the presidency.
The yen fell 0.1% to 149.32 per dollar, remaining on the stronger side of 150 per dollar, after briefly surpassing this level last week for the first time since early August.
The dollar index’s gauge against major rivals was at 103.45. It fell 0.3% on Friday as risk appetite recovered across markets after China announced further details of its large stimulus package, but posted a gain of 0.55% for the week. The euro held steady at $1.0866 and the pound held steady at $1.3045.
Bitcoin has been lifted by Trump’s improving outlook, as his administration is seen as taking a softer line on cryptocurrency regulation. It was last up 0.8% at $69,400, and is up 18% since Oct. 10.
With no major economic events this week, the market’s focus will be on corporate earnings and U.S. election risk, and perhaps an increase in dollar hedging costs and other portfolio risks, he said in a note Chris Weston, head of research at the Australian online broker Pepperstone.
“With just 15 days until the US election, traders need to decide if now is the right time to start placing election trades with greater conviction,” Weston said.
The clearest way to express Trump’s tariff risk is to be long the dollar versus the euro, the Swiss franc and the Mexican peso, he said.
Brad Bechtel, global head of FX at Jefferies, also noted that rising real interest rates are helping the dollar, particularly against these three currencies.
“We expect this trend to continue until the election and, if Trump wins, likely even after the election,” Bechtel wrote.
Last week, the yen fell 0.3%, the euro fell 0.6%, the pound remained flat and the dollar index rose 0.55%. The Mexican peso fell 3%.
The euro has fallen more than 3% in three weeks and broken above its 200-day moving average, parking near a two-and-a-half-month low.
