Trump's victory has caused a huge shock in the global exchange rate market.
With the dust settled on the US election, the global exchange rate market has experienced an epic shock. Among them, the US dollar rose strongly, and the US dollar index surged by over 1.8% during the day. Global non US currencies are facing enormous depreciation pressure, and emerging market currencies are clearly under pressure. Among them, the Mexican peso led the decline, falling more than 2% against the US dollar, hitting a two-year low.
The impact on the offshore RMB exchange rate is almost synchronous. As of 16:30 today, the US dollar offshore RMB exchange rate was reported at 7.1765, with a intraday low of 7.0907 and a rare intraday maximum amplitude exceeding 950 basis points.
Analysts believe that the current market is generally betting on the continued strength of the US dollar. Deutsche Bank pointed out that with the Republican Party controlling both houses of Congress, the US dollar will have greater upward potential and will also trigger greater pressure on emerging market and trade-related currencies. Some analysts also remind that the actual effect of Trump's policies remains to be observed, and the strength of the US dollar may not be sustained in the long run, but it clearly has a supporting effect in the short term.
Global currency market shock
The results of the 60th US presidential election have been announced! On the early morning of November 6th local time, Republican presidential candidate Trump announced his victory in the 2024 presidential election.
As a result, the global exchange rate market experienced an epic shock. Among them, the US dollar index rose sharply, briefly recovering from the 104 and 105 levels, but then the increase slightly declined. As of 16:30 Beijing time, the increase narrowed to 1.35% and was reported at 104.8014.
Traders expect that Trump's possible policy tendencies, including tough tariff policies and trade protectionism, will trigger inflation and further push up the US dollar. Ipek Ozkardeskaya, an analyst at Ruixun Bank, stated in the latest report that the "Trump deal" is underway, with the market betting that its policies will push up inflation and lead to higher interest rates.
Against the backdrop of a significant strengthening of the US dollar, non US currencies worldwide are facing depreciation pressure, while emerging market currencies are clearly under pressure. Among them, the Mexican peso led the decline, falling more than 2% against the US dollar, hitting a two-year low.
Given Trump's tariff policies, Mexico, as one of the main affected countries, is under significant pressure on the Mexican peso. Investors are also evaluating the recovery ability of the Mexican economy under this policy.
BMI, a subsidiary of Fitch Ratings, stated that Trump's victory could trigger a large-scale sell-off of emerging market currencies, with the Mexican peso likely to be the hardest hit. BMI predicts that if Trump wins this time, the peso will depreciate by about 9% against the US dollar by the end of 2024.
According to data from Yingwei Finance, the euro fell to a four month low of $1.0704 against the US dollar; The pound fell more than 1% to 1.2900 against the US dollar; The Australian dollar fell 1% to 0.6573 against the US dollar; The exchange rate of the US dollar against the Japanese yen surged by 1.7% during the day, and now stands at 154.03 points; The Korean won's decline against the US dollar widened to 1.22%, hitting a low point since April.
The impact on the offshore RMB exchange rate is almost synchronous. As of 16:30, the US dollar offshore RMB exchange rate was reported at 7.1765, with a intraday low of 7.0907 and a rare intraday maximum amplitude exceeding 950 basis points.
Nomura Securities analysts stated in a report that Trump's victory in the presidential election will widen the existing policy divergence between the Federal Reserve and the European Central Bank. If actual inflation rises, there is a risk that the Federal Reserve will stop its easing cycle under Trump's leadership.
Strong US dollar hits
Analysts believe that the current market is generally betting on the continued strength of the US dollar. Deutsche Bank pointed out that with the Republican Party controlling both houses of Congress, the US dollar will have greater upward potential and will also trigger greater pressure on emerging market and trade-related currencies.
James Kniveton of Convera pointed out that the current market is clearly preparing for a volatile geopolitical situation, which will undoubtedly provide support for the US dollar, while major trading currencies and emerging market currencies such as the Mexican peso may face downward pressure.
Meanwhile, some analysts remind that the actual effect of Trump's policies remains to be observed, and the strength of the US dollar may not be sustained in the long run, but it clearly has a supporting effect in the short term. In the coming days, with further clarification of the election results and possible policy directions from Trump, the volatility of the US dollar may increase further. In the short term, there is still ample room for the US dollar to rise, but investors also need to pay attention to risks to cope with potential reversals in the US dollar trend.
The US bond market also experienced a sharp sell-off. On November 6th, the yield on 10-year US Treasury bonds surged by over 3%, reaching a four month high and latest at 4.408%.
JPMorgan previously predicted that if Trump wins and the Republican Party gains control of the House and Senate, the yield of 10-year US treasury bond bonds may rise to 4.6%.
On the core issue of US bond interest rates, Galaxy Securities reported on November 5th that if Trump is elected, policies such as expanding the fiscal deficit and imposing tariffs will lead to high inflation, increasing long-term potential risks, making it difficult for US bond yields to have downward momentum, and even posing a significant risk of soaring.
Galaxy Securities believes that if tariffs are imposed, the RMB exchange rate may face another shock. If the exchange rate reaches around 7.3, the People's Bank of China may take countercyclical adjustment actions similar to those in 2024; The exchange rate has once again become an important constraint on interest rate reduction, and the People's Bank of China may use reserve ratio reduction and net purchase of treasury bond as the main path of monetary easing.
Deutsche Bank pointed out that "a potential unified government under Trump's leadership will have greater fiscal policy freedom, which is also the biggest driving force for the appreciation of the US dollar." This is one of the core logics behind the current rise of the US dollar.
Jing Chuan, Chief Economist of East Asia Futures, believes that if Trump takes office, there will be a divergence in the trend of international commodities, such as support for non-ferrous metals and pressure on crude oil.
On November 6th, Xinda Futures analyzed that from the perspective of Trump's policy content, crude oil is bearish, including firstly, the rise of the US dollar, secondly, the end of the Israeli Palestinian War and the reduction of supply problems under geopolitical disturbances, thirdly, supporting traditional energy and increasing forward supply of crude oil.
Xinda Futures believes that the analysis of the US election is based on current policy proposals, but whether the policy proposals can ultimately be implemented is a question. The US presidential election is only a short-term disturbance, and in the future, various assets will return to their fundamentals. The profound impact of the US presidential election will ultimately be applied to asset trends through fundamentals.