'Trump Trade' Weakens Dollar As Polls Indicate Race Tightening With Kamala Harris

Amid a closely contested presidential race between Kamala Harris and Donald Trump, the dollar saw a notable decline on Monday. Weekend polls revealed a narrowing gap between the two candidates, impacting the currency markets.

What Happened: The dollar index, which measures the U.S. dollar against a basket of major currencies including the pound, euro, and yen, fell by 0.53% on Monday. This marked its largest single-day drop since September, as reported by the Financial Times on Monday. The decline followed a poll conducted by non-partisan pollster J Ann Selzer, known for its accuracy in Iowa, showing increased support for Harris in the state.

Ju Wang from BNP Paribas commented that the poll results contributed to the dollar’s decline, with Asian currencies such as the yen and renminbi gaining strength against it. Previously, the dollar had been buoyed by expectations of a Trump victory, which were associated with potential trade tariffs and tax cuts that could lead to inflationary pressures. This scenario reduced the likelihood of the Federal Reserve cutting interest rates swiftly. Additionally, the 10-year Treasury yield, which had risen with Trump’s polling odds, also saw a decrease.

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Why It Matters: The tight race between Harris and Trump has significant implications for financial markets. Harris maintains a lead in many election polls, but her advantage has been shrinking as Election Day approaches. This uncertainty is reflected in currency markets, as investors adjust their positions based on the potential outcomes.

Moreover, JPMorgan analysts have predicted that a Trump victory could lead to a surge in Bitcoin BTC/USD and gold prices. This is due to the “debasement trade” trend, where investors seek alternative assets as a hedge against currency devaluation. The ongoing race and its impact on the dollar underscore the broader economic implications of the upcoming election.

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This story was generated using Benzinga Neuro and edited by Pooja Rajkumari