Donald Trump's victory in the US presidential election led to a sharp rise in the US dollar and boosted bitcoin by 5% to a record high. On the other hand, the euro hit a 4-month low, Euronews reported.
The Republican Party regained control of the Senate and the lead in the House of Representatives, cementing a scenario that gives Trump considerable leeway in pursuing his policy agenda.
During his second term in the White House, the Republican is expected to keep taxes low on corporations and wealthy individuals and increase tariffs on foreign imports.
Economists largely agree that Trump's trade tariffs, coupled with tax cuts and a tough stance on immigration, are likely to drive up consumer prices. This could prompt the Federal Reserve to adopt a more restrictive monetary policy, further supporting the dollar.
As of 8 a.m. CET, the euro had fallen 1.75 percent to $1.0740, putting it on track for its worst day since March 2020.
The euro is having its worst day since the Kovida pandemic erupted after Donald Trump won the U.S. election.
The dollar index, tracking the strength of the US currency against a basket of major currencies, rose 1.5%.
Other currencies, including the Japanese yen, Australian dollar and British pound, also weakened, with the yen down 1.5%, the Australian dollar down 1.4% and the British pound down 1.3%.
In the Central and Eastern European currencies, the Hungarian forint fell by 2.4%, the Czech koruna by 2% and the Polish zloty by 1.9%.
Meanwhile, the Chinese yuan and Mexican peso fell by 1.2% and over 3% respectively, weighed down by expectations of tighter trade and border policies.
"The reaction in currency markets was an across-the-board strong dollar. We expect a prolonged period of dollar outperformance," wrote Francesco Pezole, forex analyst at ING Group.
However, Ottavio Costa, macro strategist at Crescat Capital, warned that Trump's potential pressure on the Federal Reserve to cut interest rates could counteract this dollar upswing.
U.S. Treasury yields jumped overnight, with the yield on the 10-year benchmark rising 15 basis points to 4.42%, widening the spread between 10-year Treasuries and German Bunds to 200 basis points - the biggest gap in six months.
A strengthening dollar and rising US yields weighed on commodities.
West Texas Intermediate (WTI) crude futures fell 1.5% to just under $71 a barrel and Brent crude fell 1.5% to $74.40.
Gold was down 0.7%, while silver and copper fell 2.4%.
Trump's victory boosted US stock futures, with S&P 500 futures up 2%, indicating a potential record opening.
Markets appear optimistic, anticipating relief from the corporate tax hike proposed by Kamala Harris and downplaying potential risks to global growth from higher US tariffs.
In Asia, Japan's Nikkei 225 rose more than 3.4%, while Hong Kong's Hang Seng and Shanghai Composite Index fell 2.5% and 1.1%, respectively, reflecting concerns about potential trade restrictions on China.
In Europe, Russian equities stood out, with the MOEX index up 2.5% amid hopes that the Trump administration may ease economic sanctions against Russia. | BGNES
