The U.S. dollar surged on Wednesday as Republican candidate Donald Trump took a projected lead in the U.S. presidential race, impacting global currencies and markets. The strengthened dollar weighed heavily on Asian currencies, with Singapore’s dollar and Thailand’s baht taking the hardest hits. Meanwhile, the Mexican peso also plunged to a two-year low, as the potential return of Trump’s policies spurred a rush into the dollar and U.S. assets.
With Fox News projecting Trump’s victory and Republican control of one chamber of Congress, investor sentiment shifted dramatically. Regional currencies like the Singapore dollar dropped 1.3%, hitting a three-month low, while Thailand’s baht fell 1.9%, reaching a two-month low in its biggest one-day drop since early 2023. The dollar was poised for its largest daily gain since March 2020, accompanied by a rise in U.S. Treasury yields to multi-month highs.
Impact of Trump’s Proposed Policies on Global Markets
Analysts are concerned about Trump’s potential tariff and immigration policies, which could trigger inflation, raise bond yields, and strengthen the dollar further. These effects would likely add downward pressure on the currencies of U.S. trading partners, especially export-dependent Asian economies, which may face challenges amid a robust dollar and U.S. trade policies.
Ken Cheung Kin Tai, Mizuho Bank’s chief Asian foreign exchange strategist, commented on the adjustments investors are making to hedge against the potential impact of Trump’s victory. “Regional investors are particularly worried about the impact from tariffs because most Asian economies rely on trade growth,” he said.
Currencies highly sensitive to tariffs, including the Chinese yuan and Mexican peso, are expected to face the most pressure under a stronger dollar. The yuan declined 0.8%, while the peso dropped as low as 20.7080 — its lowest level since August 2022.
Asian Currencies and Regional Responses
Among Asian currencies, the South Korean won, Singapore dollar, Thai baht, and Malaysian ringgit are expected to be most affected by Trump’s potential economic policies due to their heavy reliance on exports and vulnerability to disruptions in trade with the U.S. The Malaysian ringgit, Southeast Asia’s best-performing currency this year, slid 1.5%.
Malaysia’s central bank kept interest rates unchanged and pledged to manage market volatility, particularly given the uncertain U.S. election outcome. Similarly, Indonesia’s central bank indicated readiness to stabilize the rupiah, which fell 0.7% to a three-month low. Indonesian central bank officials stated that interventions could be used to curb excessive volatility in the rupiah.
Global Market Reactions and the ‘Trump Trade’ Surge
Investors globally are bracing for what they call “Trump trades,” with significant moves into the dollar, U.S. stocks, and Bitcoin, while bonds declined sharply. U.S. stock futures surged to record highs as investors positioned themselves for a Trump win and a Republican-controlled Congress. Treasury yields rose, with the 10-year bond yield reaching 4.44%, its highest level since July. Bitcoin also hit an all-time high, crossing $75,000, with investors anticipating a more favorable regulatory stance under Trump’s administration.
Matthew Ryan, head of market strategy at Ebury, emphasized how the market is positioning around a probable Trump victory. “The prospect of a Republican-controlled Congress amplifies expectations of tax cuts and regulatory rollbacks, which would favor the dollar and U.S. equities,” he noted.
Sector-Specific and Global Implications of Trump’s Election Lead
Trump’s potential policies are expected to significantly impact global asset classes. Analysts expect gains for U.S.-focused and dollar-denominated assets, particularly in sectors such as finance, energy, and technology, which are likely to benefit from deregulation and tax policies. Shares of Tesla rose in Frankfurt trading, fueled by support from CEO Elon Musk, who has publicly backed Trump. Shares of Trump Media and Technology also jumped 10% in after-hours trading.
Meanwhile, assets exposed to U.S. tariffs, like the Mexican peso and the euro, experienced sharp declines. The peso reached a two-year low, and the euro marked its biggest one-day drop since 2020 as investors assessed the potential for a sharper economic slowdown under protectionist U.S. policies. German government bond yields also saw a significant drop, mirroring concerns over the impact of Trump’s policies on the Eurozone economy.
Asian Equity Market Reaction and Central Bank Monitoring
Asian equity markets presented a mixed picture. The Hang Seng index in Hong Kong dropped 2.7%, led by declines in exporters’ stocks sensitive to U.S. trade policy. In contrast, Indian markets remained buoyant, with the Sensex gaining 0.9%, driven by optimism over domestic growth prospects.
Malaysia’s central bank reaffirmed its commitment to stabilizing the ringgit, while Indonesia’s central bank governor highlighted a focus on maintaining the rupiah’s stability amid the U.S. election volatility. Both central banks suggested they were prepared to intervene in currency markets to mitigate excess volatility.
Investor Sentiment and Outlook
Analysts indicate that Trump’s victory could usher in a period of increased volatility across global markets, particularly in emerging markets and Asia. In Hong Kong, Rong Ren Goh of Eastspring Investments warned of higher volatility due to the potential for broader trade conflicts. “With Trump, the market’s focus is on tariffs, but wider trade frictions remain a possibility. Investors are likely to approach China-related risks more defensively,” he remarked.
As election results continue to unfold, markets are watching closely for any signals on fiscal and trade policies. Should Trump’s victory hold, his tax and regulatory agenda may continue to boost the dollar, with lasting implications for global assets, particularly in emerging economies reliant on U.S. trade relations.
