Dollar at one-year high as Trump trade momentum eclipses Fed easing view

TOKYO : The U.S. dollar revisited a one-year high against major peers on Thursday, as a fourth straight winning session from momentum sparked by Donald Trump’s election victory eclipsed a rise in bets for Federal Reserve easing.
Cryptocurrency bitcoin also shot to a fresh record high of $93,480 overnight, and was rising back towards that level early in Asia’s day. Trump has vowed to make the United States “the crypto capital of the planet”.
Higher trade tariffs and tighter immigration under the incoming Trump administration are projected to fuel inflation, potentially slowing the Fed’s rate cutting cycle longer term. Expectations for deeper deficit spending are lifting Treasury yields, providing the dollar with additional support.
The President-elect’s Republican Party will control both houses of Congress when he takes office in January, Edison Research projected on Wednesday, giving him sweeping power to push his agenda.
“The USD is a magical currency backed by carry, momentum, growth differentials, (and) impending fiscal and tariff kickers,” said Chris Weston, head of research at Pepperstone.
“While trends don’t last forever, until U.S. economics start to break down, it’s likely that an increasingly rich USD position proves to be the primary factor that could cause a tradeable selloff.”
The U.S. dollar index, which measures the currency against six top counterparts including the euro and yen, added 0.1 per cent to 106.55 as of 0120 GMT, having earlier touched 106.56 for the first time since November of last year.
The dollar dipped briefly on Wednesday after a measure of U.S. consumer inflation met economists’ forecasts, keeping the Fed on track to reduce rates at their next meeting in December. But the currency soon recovered, and then rallied to new session highs.
Long-term Treasury yields also rose on Wednesday, and extended that advance in the Asian morning, pushing as high as 4.483 per cent for the first time since July 1.
The dollar rose to a fresh high since July 24 at 155.90 yen.
The euro edged down to $1.05595, only slightly above the one-year trough at $1.055575 from the previous session.
Sterling lost 0.1 per cent to $1.2698, after dipping to $1.2687 on Wednesday for the first time in more than three months.
Bitcoin rose about 2 per cent to $90,395, heading in the direction of Wednesday’s all-time peak of $93,480.
Elsewhere, the Australian dollar hovered near the previous session’s three-month nadir after marginally weaker jobs data failed to move the needle on Reserve Bank of Australia policy expectations.
The Aussie was flat at $0.64865, sticking close to Thursday’s low of $0.64805.
“After an extended period of Australian jobs growth exceeding expectations, today’s softer jobs growth offers some modest indications of cooling within an exceptionally resilient labour market,” said Tony Sycamore, an analyst at IG.
“It provides the central bank with the breathing room to maintain its focus on inflation and keep rates in restrictive territory into year-end, all without any significant signs of deterioration in the labour market.”