During today's Asian trading, the US dollar rose slightly against major currencies, and returned to its highest level since July 30 amid an increased likelihood of Donald Trump winning the presidential election and higher yields on US Treasury bonds.
The US Dollar Currency Index (DXY), which tracks the dynamics of the dollar against six currencies (euro, swiss franc, yen, canadian dollar, pound sterling and swedish krona) rose 0.12% to 104.39. Since the beginning of the month, the index has gained 3.6%, which is the largest increase since April 2022. The US dollar strengthened amid expectations that Trump will introduce additional tariffs and taxes, seen as inflationary by many in the markets. Meanwhile, 10-year Treasury yields are up 40 basis points for October in anticipation of policies that could delay interest rate cuts. According to the CME FedWatch Tool, markets see a 98.3% probability of a 0.25% rate cut at the November meeting (compared to 86.5% a week earlier) and a 70.8% probability of a 0.25% rate cut in December (compared to 64.9% a week earlier).
The yen fell by 0.65% against the US dollar, reaching its lowest level since July 30 amid the results of the Japanese general election. Experts said that the loss of the parliamentary majority by Japan's ruling coalition is likely to slow down the pace of monetary policy tightening by the Bank of Japan. The Liberal Democratic Party and its junior partner Komeito won 215 lower house seats to fall short of the 233 majority. Thus, the election results are likely to lead to a government without political capital, increase instability and cause caution in the central bank, which will hold its next meeting this week.