Treasuries slip, dollar firm as markets grapple with US politics
dollar firmed on Monday as investors wagered the attack on U.S. presidential candidate Donald Trump made his victory more likely, while injecting a whole new level of political uncertainty into markets.
A holiday in Japan made for thin trading conditions and the early action was confined to a modest rise in the dollar while Treasury futures slipped.
Investors have tended to react to the prospect of a Trump win by pushing Treasury yields higher, in part on the assumption his economic policies would add to inflation and debt.
Proposals to levy tariffs on imports would push prices higher while eating into consumer spending power. Meanwhile, restrictions on migration could tighten the labour market and put upward pressure on wages.
«The market reaction function to a Trump presidency has been characterized by a stronger U.S. dollar and a steepening of the U.S. Treasuries curve, so we might observe some of that this coming week if his election odds are assessed to have further improved following this incident,» said Rong Ren Goh, a portfolio manager at Eastspring investments in Singapore.
Online betting site PredictIT has a Republican win at 66 cents, from 60 cents on Friday, with the Democrats at 38 cents. The current odds indicate that Republicans are twice as likely to win the election as Democrats.
The dollar edged up 0.3% on the Japanese yen to 158.15 but remained well short of its recent 161.96 top following a bout of suspected intervention.
The euro eased slightly to $1.0883, and the dollar index firmed a
