The U.S. dollar fell in the first trading session of the week as currency traders pulled out of “Trump trades” that had benefited in recent weeks from speculation that former Republican President Donald Trump was more likely to defeat Democratic Vice President Kamala Harris in Tuesday’s presidential election.
The U.S. Dollar Index (DXY), which measures the strength of the greenback against a basket of six other currencies, fell to a new nine-day low on Monday after polls reported that Vice President Kamala Harris was leading the U.S. presidential race.
The decline represents a reversal of the greenback’s recent surge, which had been fueled by positive economic data and predictions of a Donald Trump victory.
Analysts predict that Trump’s tax, tariff, and immigration policies will increase yields and the value of the U.S. currency, rather than give Harris a victory.
Bets on Donald Trump winning the presidency have boosted the U.S. dollar recently, as such a victory is expected to lead to inflationary policies. However, weekend polls indicating that Kamala Harris’ chances have improved weakened the dollar’s momentum.
Harris has gained ground in several polls, even though they show a close race overall.
Election Day will conclude a divisive campaign that has been marked by assassination attempts against Trump and President Joe Biden’s withdrawal in favor of Harris, with polls showing the candidates in a close tie.
Market analysts are concerned that Trump’s protectionist trade policies could harm exports and raise inflation in the world’s largest consumer market. Bonds and the currency are expected to fluctuate depending on the election’s outcome in the world’s most powerful economy.
Profit-taking has caused brief declines in the U.S. dollar, but it has since recovered and is now consolidating around 104 index points.
The U.S. central bank is expected to lower interest rates by 25 basis points at the end of its two-day meeting on Thursday. Investors will be watching for any indication that the U.S. Federal Reserve might forgo a rate cut in December.
The Bank of England is expected to cut interest rates by 25 basis points during its meeting on Thursday, the Riksbank is expected to ease by 50 basis points, and the Norges Bank is expected to hold rates steady.