The U.S. dollar rose toward a four-month peak against major currencies on Tuesday, while Bitcoin continued its record rally as investors flocked to trades expected to benefit from the upcoming Donald Trump administration. The euro hovered near an almost seven-month low reached the previous night, and the yuan slumped to its lowest level in over three months, with both Europe and China facing potential Trump tariffs.
The U.S. dollar index, which measures the currency against six major peers, including the euro, increased by 0.16% to 105.59 as of 0507 GMT, edging closer to Monday’s high of 105.70, its strongest level since July 3. Bitcoin surged to a new all-time high of $89,637 earlier that day. Trump has pledged to make the United States “the crypto capital of the planet.” “If history is any guide, Bitcoin could easily finish the year around $100,000,” said Kyle Rodda, a senior financial markets analyst at Capital.com.
While commenting on the market dynamics, Rodda noted that “the expectation of U.S. economic outperformance and aggressive trade measures from the Trump administration continues to push the U.S. dollar higher.” He added that “markets are reassessing expectations of Federal Reserve cuts, with a cut at the December meeting now in question.”
According to Decision Desk HQ, Trump’s Republican Party will control both houses of Congress when he assumes office in January. This majority will enable him to pursue an agenda focused on slashing taxes and reducing the size of the federal government. Potentially inflationary tariffs and immigration policies have reduced market expectations for a quarter-point rate cut by the Federal Reserve on December 18, with the odds now at about 69%, down from nearly 80% a week ago, according to CME Group’s FedWatch Tool.
Trump has warned the eurozone will “pay a big price” for not purchasing enough American exports, particularly targeting the automotive industry. He has also threatened China with blanket tariffs of 60%. The offshore yuan dipped as low as 7.2505 per dollar, its weakest since August 1, but last traded at 7.2469. The Australian dollar, influenced by the economic outlook for China—Australia’s top trading partner—fell by 0.33% to $0.65525. The euro dropped to $1.0629 overnight, its lowest level since April 22, and last traded at $1.0642.
The shared currency is under additional pressure from political uncertainty in Germany, the eurozone’s largest economy. Chancellor Olaf Scholz’s remaining coalition partner, the Greens, has joined opposition calls for an earlier parliamentary vote, potentially paving the way for a snap election. Consumer inflation readings are expected from around the region on Tuesday, including Germany.
Meanwhile, sterling weakened by 0.23% to $1.2841 ahead of employment data that could indicate the pace of Bank of England rate cuts. The yen edged up about 0.1% to 153.48 per dollar, recovering slightly from its 0.7% decline overnight. The Japanese currency had dropped to a three-month low of 154.715 per dollar last week.
“There is more upside for the U.S. dollar in our view,” said Kristina Clifton, a senior currency strategist at Commonwealth Bank of Australia. “The quick capital has already shifted, but long-term investors will take time to adjust their portfolios.”