Dollar buoyant, crypto jumps as markets turn in favour of a Trump victory

by Rae Wee

SINGAPORE (Reuters) – The dollar rose broadly on Monday and cryptocurrencies jumped as trading for Donald Trump’s victory in the upcoming U.S. election accelerated following the assassination attempt on the former U.S. president.

Trading in Asia was quiet as Japan went on holiday, but news of Trump’s shooting weighed on market sentiment, with investors narrowing their odds of a Trump victory in November.

Jack Ablin, chief investment officer at Cresset Capital, said the assassination attempt would boost Trump’s “reputation of strength.”

Online betting site PredictIT shows a Republican win at 66 cents, up from 60 cents Friday, with Democrats at 38 cents. Current odds suggest Republicans are twice as likely to win the election as Democrats.

This led to a general rise in the dollar, with the euro falling 0.14% to $1.0895, while the pound fell 0.12% to $1.2975.

There was no cash U.S. Treasuries trading in Asia on Monday because of the Japanese holiday, but 10-year Treasury futures fell slightly, suggesting yields will rise when cash trading begins later in the day. Bond yields move inversely to prices.

“The market reaction to Trump’s presidency has been characterised by a stronger US dollar and a steepening US Treasury yield curve. So if the election odds are assessed to have improved further following this event, we could see some of these in the coming week,” said Rong Ren Goh, portfolio manager at Eastspring Investments.

Cryptocurrency prices have similarly surged on expectations of a Trump win, with Bitcoin last up 9% to $62,766. Ether rose more than 7% to $3,331.60.

Trump has presented himself as a defender of cryptocurrencies but has not provided details about his proposed cryptocurrency policy.

In other currencies, the Australian dollar fell 0.08% to $0.6778, while the New Zealand dollar fell 0.29% to $0.6100.

The dollar index did not change much at 104.20.

Under a Trump presidency, market analysts expect more hawkish trade policy, less regulation and looser climate change regulations.

Investors are also awaiting an extension of corporate and personal tax cuts set to expire next year, raising concerns that budget deficits will rise under Trump.

I’m still struggling

News from China caught investors’ attention on Monday, with data showing the world’s second-largest economy grew much slower than expected in the second quarter as a long-running housing crisis and job insecurity weighed on domestic demand.

New home prices in China fell at their fastest pace in nine years in June, according to separate figures released earlier in the day. The sector is struggling to find bottom despite government support measures to control oversupply and boost confidence.

The story continues

The Chinese yuan showed little reaction to the data and only slightly extended its early session losses, falling 0.14% to 7.2609 against the dollar on the onshore market on its last trading day.

“On net, this is a negative result. It suggests that second-quarter growth momentum appears to be weakening,” said Alvin Tan, head of Asia FX strategy at RBC Capital Markets.

“The weakening of momentum in the second quarter means we will need more support to get the economy to the 5% target for the full year.”

China’s top officials’ meeting, which is held every five years and usually involves policy changes, began on Monday and the four-day plenary session will monitor measures to support a patchy recovery in the world’s second-largest economy.

The yen, meanwhile, has pared some of its gains since last weekend and was last seen trading at 157.97 against the dollar, but it was still well below its near-month-high of 157.30, which it reached on Friday.

Tokyo is thought to have intervened last week to support the Japanese currency, which has been losing value after a weaker-than-expected U.S. inflation report. The Bank of Japan may have spent 3.57 trillion yen ($22.4 billion) to do so, according to figures released on Thursday.

Analysts said Monday’s holiday in Japan could create ideal conditions for authorities to take action again amid weak liquidity, similar to the round of interventions in April-May.

“Forex intervention in a slowdown or after weak economic data from the US seems like a logical move to ‘get more bang for the buck’,” said Jane Foley, head of foreign exchange strategy at Rabobank.

“The intervention this spring shows that the Ministry of Finance is fully prepared to act outside normal trading hours in Tokyo.”

(Reporting by Rae Wee, Vidya Ranganathan and Suzanne McGee; Editing by Stephen Coates)