On Friday (November 15th), during the Asian trading session, the US dollar index saw slight fluctuations and is currently at 106.9, remaining near its one-year high. The dollar showed strong performance against major currencies on Thursday, reaching as high as 107.07, marking a new high within a year and rising for five consecutive trading days. The market's expectation of Trump's election victory, with the possibility of him re-entering the White House, is one of the main factors driving the dollar's rise. Investors generally anticipate that if Trump takes office, he will implement more aggressive economic policies, including imposing higher tariffs on imported goods and tightening immigration policies, leading to increased inflation. This prospect has heightened market interest in the dollar.
Under the potential policy backdrop of Trump's return, the market also expects the Federal Reserve to maintain high interest rates in the long term to prevent inflation from spiraling out of control. Fed Chair Powell recently stated that there are currently no plans to cut rates urgently, which further cooled expectations for a rate cut in December, reinforcing the dollar's support. Powell's stance aligns with the current economic situation where inflationary pressure has not fully subsided, indicating a higher likelihood of the Fed continuing its tight monetary policy in the coming months.
Trump's possible tariff policy if he takes office is expected to raise the prices of imported goods, whereas stricter immigration policies could lead to a tightened labor supply. These two policies could jointly increase inflationary pressure, making it more challenging for the Fed to control inflation and enhancing the dollar's attractiveness. Meanwhile, expectations for increased fiscal deficits are also rising. During the campaign, Trump stated that he would prioritize increasing infrastructure spending and the military budget, which are believed to further deepen the deficit and elevate US debt levels, potentially boosting the dollar further.
Moreover, in the context of a global economic slowdown, the demand for the dollar as a safe-haven currency is constantly increasing. Given that central bank policies in Europe, Asia, and other regions are relatively loose, the trend of capital inflow into dollar assets may continue. Analysts generally believe that the expectation of Trump's return, combined with the Federal Reserve's tightening stance, provides strong support for the dollar. It is expected that the dollar may continue to remain strong in the coming weeks. The focus of the market will be on further statements from the Federal Reserve and specific policy proposals from Trump's team, which will be key factors driving the dollar's movement.
