NEW YORK: The dollar is on pace for its best month since 2022 as traders reprice Federal Reserve expectations and prepare for a presidential election that threatens to upend macro markets.
The greenback rose against all of its Group-of-10 peers Wednesday, matching a steady climb in US Treasury yields.
Investors heavily sold the yen, which fell below the 153 per dollar mark to its weakest level in 12 weeks before paring losses, while the euro and pound both slipped for a third-straight session.
A Bloomberg gauge of the dollar is up some 3.1% in October.
With the election now less than two weeks away, the currency’s rise reflects, in part, a bid for the relative safety of US assets amid fear of market turmoil – as well as the prospect that the greenback could gain even more under a Donald Trump presidency.
The cost to hedge against future swings in the dollar is increasingly on the rise and at the highest in 19 months.
“If you don’t hedge your book for the rise in Trump’s probability, you’d look rather foolish if you didn’t buy that tail risk when it comes to end of year discussions,” said Mizuho macro strategist Jordan Rochester.
The market is seeing “continued US dollar buying to the point where it’s extremely uneconomic”, according to him. As the US economy proves resilient, meanwhile, speculative currency traders have largely erased a bearish dollar outlook held since the market tumult of August. –– Bloomberg
