The dollar surged on Monday as investors sought safety following the attempted assassination of former U.S. President Donald Trump, while the yen struggled despite suspected intervention by Tokyo.
The dollar strengthened on Monday as investors sought safety following the attempted assassination of former U.S. President Donald Trump, causing the yen to falter despite suspected intervention efforts from Tokyo.
Asian trading was muted due to a holiday in Japan, but the news of the Trump shooting dominated the market, causing investors to reassess the odds of a Trump victory in the upcoming U.S. elections.
Jack Ablin, Chief Investment Officer at Cresset Capital, suggested that the assassination attempt could bolster Trump’s “reputation for strength.” He noted, “The specter of political violence introduces a whole new level of potential instability.”
Ablin added, “It’s uncertainty and volatility, and of course, markets don’t like that. It’s not an environment anyone wants to see.”
In early trade, the dollar made broad gains, pushing the euro down 0.23% to $1.0885 and sterling 0.17% lower to $1.2968. The risk-sensitive Australian dollar fell 0.18% to $0.6771, while the New Zealand dollar slid 0.35% to $0.6097.
“The market reaction to a Trump presidency has historically been characterized by a stronger U.S. dollar and a steepening U.S. Treasuries curve,” said Rong Ren Goh, a portfolio manager at Eastspring Investments. “We might observe some of that this week if his election odds are seen to have improved following this incident.”
Against a basket of currencies, the greenback was little changed at 104.28.
Cash U.S. Treasuries were untraded in Asia due to the Japan holiday, but 10-year Treasury futures edged lower, indicating yields might rise when cash trading resumes. Bond yields move inversely to prices.
Under a potential Trump presidency, analysts expect a more hawkish trade policy, reduced regulation, and looser climate change regulations. Investors also anticipate an extension of corporate and personal tax cuts set to expire next year, raising concerns about rising budget deficits under Trump.
Intervention Watch
In other Asian markets, the yen remained under scrutiny after Tokyo was suspected of intervening to support the struggling Japanese currency last week.
The yen was last down 0.3% at 158.36 against the dollar, having strengthened to a roughly one-month high of 157.30 per dollar on Friday.
Data from the Bank of Japan suggested that authorities may have spent up to 3.57 trillion yen ($22.4 billion) on Thursday in the latest round of intervention this year.
The Ministry of Finance (MOF) has not confirmed whether it was behind the yen’s sudden strengthening, reiterating only that authorities are ready to act as needed in the foreign exchange market.
Analysts suggested that Monday’s holiday in Japan could provide ideal conditions for further intervention due to thin liquidity, similar to the April-May intervention rounds.
Jane Foley, head of FX strategy at Rabobank, stated, “The confirmed FX intervention in April and May showed that policymakers are prepared to be strategic about the timing of their moves. Intervening in quiet conditions or after the release of softer U.S. economic data seems sensible to maximize impact.”
“The spring intervention indicated that the MOF is very prepared to act outside normal Tokyo trading hours,” she added.
