Trump’s Guidelines Raise Dollar to Highest Levels in Nearly 14 Years

In global currency markets, the value of the dollar against a basket of currencies maintained its highest levels in nearly 14 years last week, with its exchange rate against the Japanese yen rising, while it stagnated against the euro.

The euro’s exchange rate against the dollar remained almost unchanged on a weekly basis at 1.0590 dollars, and during the week it dipped to 1.0518 dollars, the lowest level since March of last year.

Against the Japanese currency, the dollar’s price jumped 2.0 percent last week to 113.15 yen, and at one point it reached 113.90 yen, the highest level in eight months.

The dollar also strengthened against most other currencies, with its index, which shows the value of the dollar against six major world currencies, hovering around the highest levels since 2003. The strengthening of the dollar is attributed to rising yields on U.S. Treasuries, given the expected interest rate increase by the Fed and strengthening inflation in the U.S.

“Inflationary” Trump Since Donald Trump won the race for the White House, yields on U.S. Treasuries have surged as his proposed policies – from protectionism and imposing high tariffs on imported goods, to infrastructure investment, increased fiscal spending, and tax cuts – could spur inflation.

Thus, yields on two-year U.S. Treasuries reached 1.1630 percent, the highest level in six and a half years. Yields on 10-year U.S. Treasuries reached, in turn, the highest level in 16 months at 2.41 percent.

And due to the expected strengthening of inflation in the upcoming period, an increase in interest rates by the U.S. central bank is anticipated as early as December. Markets estimate that the chances of the Fed raising rates by the end of the year are now over 80 percent, and next year a faster pace of money price growth is also possible.

Since November 8, when Trump won the race for the White House, the dollar has strengthened nearly 4 percent against a basket of currencies.

“The trend is likely to persist as the Fed prepares for an interest rate hike in December, while investors position themselves for Trump’s plans to increase fiscal spending and reduce taxes,” analysts at UOB Group noted in a client memo.