US Dollar Rises Overnight as Speculation Strengthens Trump's Election Lead

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The U.S. dollar strengthened against the Mexican peso and other major global currencies overnight as the results of the presidential election became more visible.

The greenback gained 2.9% against the Mexican peso, reaching its highest level since 2022. The dollar also rose against the Swiss franc, the Japanese yen and the Chinese yuan. The ICE U.S. dollar index rose 1.6%, reaching its highest level since at least July.

The euro fell to $1.0738 against the dollar and hit its lowest level since at least July 3 during the trading session.

The US currency's gains widened as speculation grew that former President Donald Trump would lead Vice President Kamala Harris in the US presidential election.

Shortly after 2 a.m. ET, NBC News projects that Trump has won the key battleground states of North Carolina, Pennsylvania and Georgia, with some states still too early for him to win. call, or too close to call. NBC News also predicts that Republicans will take back the Senate.

Investors are closely watching the foreign exchange market as it is one of the most liquid markets open upon the announcement of election results. Currencies are more regularly traded overnight in the United States than domestic stocks and bonds.

“It will be essential to watch the dollar tonight. It will be the most liquid and transparent message as to what we are asking the markets to do, because this is where people can make their money grow quickly,” he said. said David Zervos, director of markets at Jefferies. strategist on CNBC's “Money Movers” Tuesday.

Traders generally expect that a strong night for Trump and Republicans in Congress could push the greenback higher. Trump's proposals to increase tariffs against the United States' major trading partners would, in theory, result in a stronger dollar.

“Trade taxes are expected to increase domestic trade activity and reduce U.S. imports. We believe these effects should help more domestically oriented small-cap companies and increase the exchange value of the U.S. dollar,” he said. said Paul Christopher, head of global market strategy at Wells Fargo Investment. Institute, said in a note to clients Tuesday.

The dollar has generally strengthened as Election Day approaches. The dollar index rose more than 3% in October, although it has fallen in recent days.

Stock chart iconStock chart icon

The dollar strengthened as the elections approached.

Nonetheless, market participants appear to be positioned for a scenario in which Trump wins, said Chris Turner, global head of markets at ING.

“The biggest move in the foreign exchange markets will be the dollar falling if there is no red sweep. And particularly if Kamala wins, I think that would be the biggest dollar moving down,” Turner said, referring to Democratic candidate and Vice President Kamala. Harris. “I think the jury is out on whether Trump wins the presidency, but Congress is divided.”

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