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Author: Zhou Le.

With the dust settling on the US elections, the global exchange rates market has witnessed an epic seismic event. The US dollar surged strongly, with the US dollar index spiking over 1.8% intraday. Non-US currencies worldwide are facing immense devaluation pressure, with emerging market currencies notably under pressure. The Mexican peso took the lead in the decline, plummeting over 2% against the US dollar, reaching a two-year low.

The impact on the offshore renminbi exchange rates is also almost synchronized. As of 16:30 today, the US dollar against the offshore renminbi exchange rate was reported at 7.1765, with an intraday low of 7.0907, and a rare intraday maximum fluctuation exceeding 950 basis points.

Analysts believe that the current market is generally betting on the continued strength of the US dollar. Deutsche Bank pointed out that with the Republican control of both the House and the Senate, the US dollar will have a greater upward potential and will also exert more pressure on emerging market and trade-related currencies. Some analysts also caution that the actual effects of Trump's policies remain to be seen, and the strong US dollar may not be sustainable in the long run, but clearly has a supporting effect in the short term.

Global exchange market seismic event

The 60th US presidential election results revealed! In the early hours of November 6th local time, Republican presidential candidate Trump announced his victory in the 2024 presidential election.

As a result, a epic earthquake occurred in the global exchange rate market. Among them, the US dollar index surged in a straight line, once again regaining the 104 and 105 levels, with an increase of 1.83% so far, reaching 105.312.

Traders expect that Trump's possible policy inclinations (including a tough tariff policy and trade protectionism) will trigger inflation, further boosting the USD. Swiss bank analyst Ipek Ozkardeskaya stated in a recent report, 'Trump trade' is in full swing, with the market betting that his policies will push up inflation and lead to higher interest rates.

Against the backdrop of a significantly stronger USD, global non-USD currencies are facing depreciation pressure, while emerging market currencies are under obvious pressure. Among them, the Mexican peso took the lead, plummeting more than 2% against the USD, hitting a two-year low.

Given Trump's tariff policy, Mexico, as one of the countries most affected, the Mexican peso is significantly under pressure. Investors are also evaluating Mexico's economic recovery capabilities under this policy.

BMI under Fitch Ratings stated that a Trump victory could trigger massive selling of emerging market currencies, with the Mexican peso potentially suffering the most severe impact. BMI expects that if Trump wins, the peso will depreciate by about 9% against the USD by the end of 2024.

Data from Investing.com shows that the EUR to USD exchange rate has fallen to a four-month low of $1.0704; GBP to USD exchange rate dropped over 1% to 1.2900; AUD to USD exchange rate fell by 1% to 0.6573; USD to JPY exchange rate surged 1.7% at one point, now at 154.03 points; KRW to USD decline widened to 1.22%, hitting a low point since April.

The impact on the offshore renminbi exchange rate is almost synchronized. As of now, the offshore RMB continues to decline, dropping more than 1000 points intra-day, currently at 7.20765.

Nomura Securities analysts stated in a report that a Trump victory in the presidential election will further widen the existing policy divergences between the Federal Reserve and the European Central Bank. If actual inflation rises, there is a risk that under Trump's leadership, the Fed may stop its loose policy cycle.

Strong US dollar on the offensive.

Analysts believe that the current market generally bets on a stronger US dollar. Deutsche Bank pointed out that with the Republican control of both houses of Congress, the US dollar will have greater upside potential, also causing greater pressure on emerging markets and trade-related currencies.

James Kniveton of Convera pointed out that the current market is clearly preparing for a turbulent geopolitical situation, which will undoubtedly support the US dollar. Meanwhile, major trade currencies and emerging market currencies like the Mexican peso may face downward pressure.

At the same time, some analysts caution that the actual effects of Trump's policies remain to be seen, the strength of the US dollar may not be sustainable in the long term, but it apparently has a supportive effect in the short term. Over the next few days, as the election results become clearer and the possible direction of Trump's policies, the volatility of the US dollar may further increase. In the short term, there is still ample room for the US dollar to rise, but investors also need to be aware of risks to cope with the potential reversal of the US dollar's trend.

The US bond market has also experienced a fierce sell-off. On November 6, the yield on the 10-year US Treasury bond surged by over 4%, rising to a four-month high of 4.475%.

JPMorgan previously predicted that if Trump wins and the Republicans gain control of both houses of Congress, the 10-year US Treasury bond yield could rise to 4.6%.

On the core US bond rates, Galaxy Securities reported on November 5 that if Trump is elected, policies such as expanding the fiscal deficit and imposing tariffs all point to high inflation, increasing long-term potential risks. This makes it difficult for US bond yields to decrease, and there is even a risk of a significant rise.

Galaxy Securities believes that if tariffs are imposed, the renminbi exchange rate may once again face pressure. If the exchange rate approaches the 7.3 level, the People's Bank of China may take actions similar to the countercyclical adjustment in 2024; the exchange rate could become an important constraint on interest rate cuts, and the People's Bank of China may use reserve ratio cuts and net purchases of government bonds as the main paths for monetary easing.

Deutsche Bank pointed out, 'The potential unified government under the leadership of Trump will have greater fiscal policy freedom, which is also the major driving force behind the appreciation of the US dollar.' This is one of the core logics for the current rise in the dollar.

Jing Chuan, Chief Economist of East Asia Futures, believes that if Trump comes to power, there will be a differentiation in the international commodity trends. For example, nonferrous metals will receive support, while crude oil will face pressure.

On November 6th, Cinda Futures analysis stated that from the perspective of Trump's policy content, crude oil is bearish. This includes first, the rise of the US dollar; second, the end of the Israeli-Palestinian war, leading to reduced supply issues under geopolitical disturbances; and third, support for traditional energy, increasing future crude oil supply.

Cinda Futures believes that the analysis of the US elections is based on current policy statements, but whether these policy statements can ultimately be implemented is a question. The US elections are only short-term disturbances, and in the future, various assets will return to their fundamentals. The profound impact of the US elections will ultimately affect asset trends through fundamental forces.

Editor / jayden