The U.S. dollar index gained 0.16% to 105.59, edging back towards Monday’s high of 105.70, its highest since July 3
The U.S. dollar rose toward a four-month high versus major peers on Tuesday, while bitcoin extended its record rally as investors continued to pile into trades seen as benefiting from the incoming Donald Trump administration.
The euro stayed near an almost seven-month low hit overnight, and the yuan plunged to a more than three-month low with Europe and China both major targets of potential Trump tariffs.
The U.S. dollar index gained 0.16% to 105.59 as of 0507 GMT, edging back towards Monday’s high of 105.70, its highest since July 3.
Leading crypto currency bitcoin pushed to a new all-time high of $89,637 earlier in the day. Trump has vowed to make the US “the crypto capital of the planet”.
If history is any guide, Bitcoin could easily finish the year around $100,000, according to Kyle Rodda, a senior financial markets analyst at Capital.com.
Meanwhile, the expectation of U.S. economic outperformance and aggressive trade practices from the Trump administration continues to push the U.S. dollar higher, he said.
Markets are dialling back expectations of Fed cuts going forward, with a reduction at the December meeting being thrown into question, he added.
Potentially inflationary tariffs and immigration policies have seen market odds of a quarter point Fed interest rate cut on December 18 pared to around 69% from nearly 80% a week ago, as per CME Group’s FedWatch Tool.
Trump has warned that the euro bloc will “pay a big price” for not buying enough American exports, with cars a particular target of the incoming U.S. President. He has threatened China with blanket 60% tariffs.
The offshore yuan skidded as low as 7.2505 per dollar, the lowest since August 1, before trading at 7.2469.
The Aussie – which tends to be swayed by the economic outlook for China, Australia’s top trading partner – weakened 0.33% to $0.65525.
The euro dipped to $1.0629 overnight for the first time since April 22, and last changed hands at $1.0642.
The shared currency is feeling additional pressure from political uncertainty in the bloc’s biggest economy, Germany.
Consumer inflation readings are due from around the region on Tuesday, including Germany.
Sterling eased 0.23% to $1.2841 ahead of employment data that could provide clues on the pace of BoE rate cuts.
The yen rose nearly 0.1% to 153.48 per dollar, making up a small part of its 0.7% decline overnight. The Japanese currency tumbled to a three-month low of 154.715 per dollar last week.
