The cryptocurrency (Bitcoin) reached its highest level in 3 months during early trading on Monday, and the dollar appears to be heading to expand its gains in the market with the countdown to the US presidential elections.
Opinion polls indicate an increased likelihood of former President Donald Trump winning the presidential elections scheduled for November 5, which supports the dollar because his proposed customs and tax policies are likely to keep interest rates high and undermine the currencies of trading partners.
Currency movements in major markets last week were driven by the European Central Bank reducing interest rates and strong US data, which led to a decline in expectations about the speed of reducing US interest rates, especially if Trump wins.
The Japanese yen fell by about 0.2% to 149.26 against the dollar, and the dollar index, which measures the US currency against other major currencies, recorded a level of 103.49 points. The index had fallen 0.3% on Friday as risk appetite in various markets improved significantly after China announced more details about the broad stimulus package, but it recorded gains of 0.55% during the week.
The European euro settled at $1.0862, as well as the British pound around $1.3041.
Bitcoin received a boost from Trump’s improved chances, whose administration is seen as adopting a softer approach to regulating cryptocurrencies. The currency rose in the latest transactions by 0.2% to $68,869, achieving gains of 18% since October 10.
Chris Weston, director of research at the Australian electronic brokerage company Pepperstone, said in a note that with no major economic events scheduled for this week, the market’s focus will be on corporate profits, US election risks, and perhaps higher hedging costs from the rise in the dollar and other portfolio risks.
He added, “With only 15 days remaining until the US elections, traders need to determine whether now is the right time to begin election-related trading with greater conviction.”
Analysts say that rising real interest rates in the United States are pushing the dollar higher. But more importantly, interest rates elsewhere are falling rapidly, giving the dollar a yield advantage.
The closely watched gap between US and German 10-year bond yields has widened to about 189 basis points as US bond yields rose in the past few weeks while German bond yields fell.
