Dollar Surges as Trump's Election Hopes Soar Amid Assassination Attempt

The U.S. dollar strengthened and cryptocurrencies surged on Monday, spurred by increased odds of Donald Trump winning the upcoming presidential election after an assassination attempt on him. Investors expect a stronger dollar, a steepening U.S. Treasuries curve, and more relaxed trade regulations under Trump. Chinese economic concerns also weighed on global markets.

The U.S. dollar surged broadly on Monday, accompanied by a jump in cryptocurrency prices, as speculation over a victory for Donald Trump in the upcoming U.S. elections intensified following an attempted assassination of the former President. Trading in Asia was thin due to a holiday in Japan, but the news dominated market sentiment, prompting investors to narrow the odds of a Trump win come November.

Jack Ablin, chief investment officer at Cresset Capital, suggested the incident might enhance Trump's 'reputation for strength.' According to online betting site PredictIT, the probability of a Republican victory rose to 66 cents from 60 cents on Friday, with Democrats at 38 cents. This shifted market expectations, causing the dollar to rise broadly, the euro to ease 0.14% to $1.0895, and sterling to fall 0.12% to $1.2975. U.S. Treasuries went untraded in Asian markets, but 10-year Treasury futures edged lower, indicating expected yield rises later.

Rong Ren Goh, a portfolio manager at Eastspring Investments, noted that a Trump presidency historically leads to a stronger dollar and a steepening U.S. Treasuries curve. Consequently, crypto prices surged, with bitcoin rising by 9% to $62,766 and ether jumping over 7% to $3,331.60. Meanwhile, the Australian dollar dropped 0.08% to $0.6778, and the New Zealand dollar slid 0.29% to $0.6100, with the dollar index steadied at 104.20. Analysts foresee a hawkish trade policy, less regulation, and potential tax cuts under another Trump presidency.

However, China's economic slowdown also drew investor attention, as its second-quarter growth lagged behind expectations, burdened by a persistent property downturn and reduced domestic demand. New data indicated that China's home prices fell at their fastest pace in nine years in June. The yuan extended its losses slightly, trading 0.14% lower at 7.2609 per dollar. Analysts point to weakening growth momentum and possible need for further economic support.

Elsewhere, the yen reversed some gains from late last week and stood at 157.97 per dollar. Speculation suggests Tokyo might intervene again in thin market conditions, similar to actions taken in April and May. Jane Foley of Rabobank noted that interventions outside regular trading hours could be more impactful.