On Monday, the dollar experienced a broad increase and cryptocurrencies saw significant jumps as speculation intensified about a potential victory for Donald Trump in the upcoming U.S. elections, following an attempted assassination of the former U.S. President. Trading volumes were lower in the Asian session due to a holiday in Japan, but news of the shooting overshadowed market sentiment, causing investors to adjust their odds for a Trump win in November.
Jack Ablin, chief investment officer at Cresset Capital, suggested that the assassination attempt might bolster Trump's image as a figure of strength. Online betting platform PredictIT shows a Republican win at 66 cents, up from 60 cents on Friday, with Democrats at 38 cents, indicating Republicans are twice as likely to win. This shift led to a broad rise in the dollar, with the euro falling 0.14% to $1.0895 and sterling dropping 0.09% to $1.2978.
U.S. Treasuries were inactive in Asia due to the Japan holiday, but 10-year Treasury futures dipped, suggesting higher yields once trading resumes. Rong Ren Goh, a portfolio manager at Eastspring Investments, noted that a Trump presidency typically results in a stronger dollar and a steeper U.S. Treasuries curve, which could be observed if his election odds continue to improve.
Cryptocurrencies also rallied in anticipation of a Trump victory, with bitcoin rising 9% to $62,760 and Ether jumping over 7% to $3,336.80. Trump has positioned himself as a supporter of cryptocurrency, though details of his crypto policy remain unspecified. Other currencies saw minor adjustments, with the Australian dollar down 0.13% to $0.6775 and the New Zealand dollar slipping 0.3% to $0.6100.
Market analysts predict a more aggressive trade policy, reduced regulation, and fewer climate change restrictions under a Trump presidency. Investors also anticipate extended corporate and personal tax cuts, raising concerns about increasing budget deficits. Meanwhile, China's economic growth in the second quarter fell short of expectations, impacted by a prolonged property market slump and job insecurity, which reduced domestic demand.
New data revealed that China's new home prices declined at the fastest rate in nine years in June, indicating the struggling sector's ongoing challenges despite government efforts to manage oversupply and boost confidence. The Chinese yuan showed minimal reaction to the data, slightly extending its earlier losses to trade 0.13% lower at 7.2602 per dollar.
Alvin Tan, head of Asia FX strategy at RBC Capital Markets, commented that the weakening second-quarter growth momentum suggests additional support is needed to achieve the annual growth target of 5%. China's top officials are convening for a once-in-five-years meeting, which will be closely watched for policy measures to aid the economy's recovery.
Elsewhere, the yen saw a partial reversal of its recent gains, trading at 157.95 per dollar, not far from a one-month high of 157.30. Tokyo is believed to have intervened in the currency market to support the yen following a less-than-expected U.S. inflation report, with Bank of Japan data indicating potential spending of up to 3.57 trillion yen ($22.4 billion).
