DXY: Dollar Index Hits 3-Month High as Traders Ramp Up Bets on Donald Trump Win

Markets are pricing in a possible Trump victory. And this could flare up inflation pressures and heat up interest rates.

• The US dollar index DXY is keeping busy conquering new heights. The currency gauge, measuring the buck’s strength against six forex rivals, shot up to levels above 104.30 early Wednesday morning — a three-month high — marking its 15th day in green out of the previous 17 sessions. There’s been a lot going on to support the upside swing for the American currency — prospects of a gradual reduction to the Federal Reserve’s interest rates and a robust US economy, to name a few.
• A more exciting one, and one for the history books, is the election play. Markets appear to be pricing in a Trump win with the so-called “Trump trade.” What’s this? Forex traders are betting that Donald Trump will win the November election and are positioning their portfolio for his economic policies in favor of the US dollar. As the election date draws closer — November 5 — dollar volatility is expected to pick up big time.
• The US dollar has added roughly 4% since late last month, largely as a result of the bumper jobs report for September. This in turn, presented a more laid back outlook for scaling down the level of interest rates. With that in mind, what will change under a possible Trump presidency? Analysts are quick to point out Trump’s plans to slap tariffs on imports — a measure that could bring back inflation and push up interest rates.