Forex: Dollar buffered by Trump policy expectations; bitcoin surges

Bakkt

21/11/2024 09:14

* 
      Bitcoin speeds toward $100,000
    

        * 
      Yen gains after BOJ's Ueda says will scrutinise data up
till Dec
meeting 
    

  
 (Updates with morning trade in Europe)
    By Amanda Cooper
       LONDON, Nov 21 (Reuters) - The dollar steadied on
Thursday as traders awaited more clarity on U.S. President-elect
Donald Trump's proposed policies amid an uncertain outlook for
interest rates, while bitcoin forged towards $100,000 for the
first time.
    Bitcoin  BTC=  has been on a blistering rally in the past
few weeks on speculation that Trump will create an easier
regulatory environment for cryptocurrencies.
    It hit a record high of $97,902 on Thursday, underpinned by
a report Trump's social media company was in talks to buy crypto
trading firm Bakkt  BKKT.N . It was last up 2.75% at $97,070.
    The dollar index  =USD  was steady at 106.55, and not far
off last week's one-year high of 107.07.
    "The U.S. is still the main driver, really. It feels a bit
of a risk-off morning. The yen is the main winner so far, and I
think that's this week, with Ukraine at front and centre at the
moment," IG chief strategist Chris Beauchamp said, referring to
an escalation in the conflict between Ukraine and Russia. 
    The euro  EUR=EBS , one of the main casualties of the
dollar's post-election ascent, was down another 0.1% at
$1.053275.
    European leaders and policymakers are already grappling with
the potential ramifications of Trump's proposed tariff hikes,
while political uncertainty in the region's largest economies -
Germany and France - is adding to that mix.
    French far-right leader Marine Le Pen on Wednesday
threatened to seek to topple Prime Minister Michel Barnier's
fragile coalition government if her National Rally (RN) party's
cost-of-living concerns were not incorporated into the 2025
budget.
    "There are enough things to be concerned about to just tilt
people towards being more cautious at the moment," Beauchamp
said.
    The seemingly unstoppable dollar has been helped by sharp
swings in expectations for U.S. interest rates. The market
currently sees just a 54% chance of a cut from the Federal
Reserve next month, down from 82.5% only a week ago, according
to CME's FedWatch Tool.
    A Reuters poll showed most economists expect the Fed to cut
rates at its December meeting, with shallower cuts in 2025 than
expected a month ago due to the risk of higher inflation from
Trump's policies.
    
    TRUMP BUMP
    The dollar has rallied more than 2% since the Nov. 5 U.S.
presidential election, driven by an expectation that Trump's
proposals on raising trade tariffs and cutting taxes could
reignite inflation and limit the Fed's ability to cut rates. 
    At the same time, traders are sizing up what Trump's
campaign pledges of tariffs mean for the rest of the world, with
Europe and China both likely in the firing line.
    "Right now, we are kind of stuck in a wait-and-worry zone
because Trump is in the midst of forming his cabinet," said Moh
Siong Sim, currency strategist at Bank of Singapore.
    "There's a lot of things that are missing there in terms of
understanding," including the timing and magnitude of policies,
and those details won't be known for a couple of months or so,
he said. 
    Elsewhere, Ukraine fired a volley of British Storm Shadow
cruise missiles into Russia on Wednesday, the latest new Western
weapon it has been permitted to use on Russian targets, a day
after it fired U.S. ATACMS missiles.
    With geopolitical tensions running high, the Japanese yen
 JPY=EBS  has outperformed. The dollar was last down 0.6% on the
day at 154.52 yen.
    The yen has lost around 10% in value in the last couple of
months, as traders have bet heavily in favour of the dollar,
given the chances that U.S. rates will remain well above
Japanese ones for some time.
    Bank of Japan Governor Kazuo Ueda said on Thursday the
central bank would "seriously" take into account foreign
exchange rate moves in compiling its economic and price
forecasts.
    He noted that there was still a month to go until the BOJ's
next policy meeting in December, adding that there would be more
information to digest by then.

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 (Additional reporting by Brigid Riley in Tokyo. Editing by
Sonali Paul and Mark Potter)
 ((brigid.riley@thomsonreuters.com;))