A greater chance of a Republican winning the White House this year could boost the U.S. dollar, even as the party seeks to offset the currency’s strength, Morgan Stanley analysts said.
“While former President Trump has spoken out against the strength of the dollar, we believe thatand their policies would lead to a stronger dollar“,” wrote strategists including Andrew Watrous and Zoe Strauss in a research note dated Tuesday, August 6.
Experts noted a surge in key dollar indices in November and December 2016, following Donald Trump’s latest victory.
“An agenda of expansionary fiscal policy A Republican landslide could boost expectations for U.S. growth and encourage capital flows into the country,” they added.
“The imposition of higher tariffs by the United States on the rest of the world could lead foreign authorities to allow a depreciation of their national currency or affect economic activity abroad, making the United States appear more attractive by comparison.”
The DXY is up 1.6 percent so far this year, even as traders increase bets that the Federal Reserve (Fed) may have to reduce interest rates more aggressively as the U.S. economy shows signs of slowing, sending markets down internationally on Monday.
On the contrary, Morgan Stanley predicts Headwinds for the dollar under another Democratic administration.
“The easing of key risks to growth – particularly those related to trade and geopolitics – will likely reduce demand for safe-haven currencies, including the US dollar, if the Democratic Party maintains control of the White House,” the analysts said.
