NEW YORK: The US dollar posted its longest weekly advance in over a year as Donald Trump’s presidential victory and persistent economic growth pushed traders to boost their bets on further US dollar gains.
The Bloomberg US Dollar Spot Index climbed as much as 0.7% last Friday, capping an eight-week rally, the longest since September 2023. The euro fell to a two-year low and the Swiss franc slid to the weakest against the greenback since July.
Speculative traders boosted their bets on US dollar gains in the week ending Nov 19 to the most bullish level since late June, Commodity Futures Trading Commission data show.
“I would not step in front of this speeding train as long as the US growth exceptionalism story continues,” said Paresh Upadhyaya, director of fixed income and currency strategy at Amundi US Inc.
The US dollar’s rally has been fuelled by speculation that Trump’s tariffs and tax cuts will fan inflation and add fuel to an economy the US Federal Reserve has already been trying to restrain.
That has caused traders to dial back expectations for how much the Fed will cut rates in the months ahead, driving up bond yields and giving oversees investors an incentive to shift money to the United States.
The euro was also dragged lower by data showing European business activity unexpectedly shrank in November, which led traders to ramp up bets on interest-rate cuts from the European Central Bank.
The euro fell as much as 1.3% to US$1.0335 before recovering to about US$1.04.
A growing number of strategists see a risk the it will reach parity with the US dollar.
The Swiss franc dropped as much as 1% against the greenback last Friday.
The Trump trade will dissipate by the end of December and the focus will return to macro factors, though those are also supportive of the US dollar, according to Invesco.
“From max bullish on the US dollar, we have transitioned to a moderate bullishness on the US dollar,” said Alessio de Longis, a senior portfolio manager at Invesco. “We are slowly but steadily taking profits on our US dollar overweights and going to a more neutral stance.”
Deutsche Bank said that not all of Trump’s policies have been priced in and the US dollar has more room to go up.
A “maximalist” scenario where Trump enacts his most extreme policies is only 30% priced into financial markets, according to George Saravelos, global head of forex research at Deutsche Bank. — Bloomberg
