By John Ikani
The U.S. dollar took a dip at the start of this week as investors began pulling out of recent “Trump trades,” which had gained value on the belief that former President Donald Trump would beat Vice President Kamala Harris in Tuesday’s election.
The U.S. Dollar Index (DXY), which tracks the dollar’s value against six other major currencies, hit a nine-day low on Monday as new polls showed Harris in the lead.
This shift marked a turnaround from the dollar’s recent growth, which had been boosted by strong economic data and bets on a Trump victory.
Experts think a Trump win would increase dollar yields and value due to policies like tax cuts and tariffs.
Recently, the dollar has risen based on expectations that Trump would implement policies leading to inflation. But weekend polls indicating Harris’s edge slowed the dollar’s gains.
Kamala Harris Gains in Polls Harris has picked up support in multiple polls, though the race remains tight.
Betting markets show Harris with a slight lead on PredictIt, while Polymarket still favors Trump as the winner. If Harris wins, expectations around Trump’s policies on tariffs and immigration could shift currency markets and U.S. Treasury yields.
The election is the culmination of a divisive campaign, marked by security concerns and Biden’s step aside for Harris, with polls nearly split.
Concerns Over Trump’s Economic Policies Some worry Trump’s approach to trade could harm U.S. exports and drive inflation. Bonds and the dollar are expected to fluctuate based on election results.
Trump Media and Technology Group, which owns Truth Social, saw shares rise 12% to over $34 on Monday after dipping 7% overnight. After climbing from $16 per share at the start of October to more than $50, the stock saw a steep decline last week.
Election uncertainty has also driven interest in the U.S. dollar as a safe-haven currency. If the president’s party also controls Congress, currency markets may see further shifts after the election. After briefly slipping, the dollar has steadied at around 104 index points.
Fed Rate Decision on the Horizon The Federal Reserve is expected to reduce interest rates by 25 basis points after its two-day meeting ends Thursday. Investors will watch closely to see if the Fed hints at another cut in December.
October’s jobs report showed fewer new jobs than predicted, raising questions about labor market strength. Recent strikes and natural disasters contributed to the lower numbers. Solid job growth in September had led investors to expect fewer Fed rate cuts.
The CME Group’s FedWatch Tool now shows an 82% chance of a December rate cut. In other countries, the Bank of England is expected to lower rates by 25 basis points, the Riksbank may ease by 50 points, while the Norges Bank will likely hold steady.
