The US dollar has bounced back over the past couple of days as interest rate expectations in the US have rebounded a little and the risk-off shift in equities bled into currency markets. While the Japanese yen has given back some of its intervention-driven gains over the past couple of days, it remains, along with the dollar and the Swiss franc, among the best performers on the week. With equity markets still on the backfoot, that safe-haven trend may well continue into next week.
Arguably, the bigger story in currencies this week is the Trump campaign putting the political spotlight on the dollar and signalling the once, and perhaps future, president’s desire for a weaker exchange rate to help make American exporters great again. So far, there is limited evidence that the swings in the electoral campaign are having much sustained impact on currency markets. That may well change as the election date draws nearer. If Trump’s odds of winning continue to improve, the tension between his stated aim of a weaker dollar and a policy platform which, for the most part, would probably have the opposite effect if implemented will become a key question.
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