The U.S. dollar experienced the biggest rally after Donald Trump won the US presidency, defeating his Democratic opponent, Kamala Harris. The DXY index, which tracks the greenback’s performance, shows the currency trading at the 104.96 mark on Wednesday. That’s a dramatic rise from a low of 103.42, which it traded yesterday minutes before the closing bell.
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The USD spiked by 1.53 points, surging 1.48% in the charts after Trump’s victory. The President-elect repeatedly vowed to protect the U.S. dollar from adversaries and make it triumph against all odds. His bold statements have gained investors’ confidence, bringing new optimism to the broader market.
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U.S. Dollar Triumphs in the Currency Market
Threats to the U.S. dollar could be considerably reduced, giving the greenback an added advantage in the markets. The Indian rupee, for example, has already fallen to a new low of 84.28. All local currencies challenging the USD are heading south, while the greenback is punching its weight above all.
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The threat of increasing tariffs on goods entering the U.S. is already sending import and export firms from emerging economies into a tizzy. Trump had vowed to increase tariffs by 100% if countries try to de-dollarize their economies. If he keeps up his promise, developing countries will be the hardest hit, as an increase in tariffs will only lead to losses. Local currencies like the Indian rupee, Chinese yuan, and Japanese yen could face turbulence if the tariffs become a reality.
“If they follow through with higher tariffs across the board, and we see continued strength in the U.S. dollar, then obviously it is weakness for emerging market currencies. But again, I’m saying that the Indian rupee is very well managed and we may not see the same level of weakness in the rupee as we see in some of the other EM currencies,” said Neeraj Gambhir, Head of Markets at Axis Bank to CNBC.