Dollar on Longest Winning Run in a Year on Trump Presidency

Naomi Tajitsu and Anya Andrianova
·3-min read

(Bloomberg) -- The dollar posted its longest weekly advance in over a year as Donald Trump’s presidential victory and persistent economic growth pushed traders to boost their bets on further dollar gains.

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The Bloomberg Dollar Spot Index climbed as much as 0.7% on Friday, capping an eight-week rally, the longest since September 2023. The euro fell to a two-year low and the Swiss franc slid to the weakest against the greenback since July.

Speculative traders boosted their bets on dollar gains in the week ending Nov. 19 to the most bullish level since late June, Commodity Futures Trading Commission data show.

“I would not step in front of this speeding train as long as the US growth exceptionalism story continues,” said Paresh Upadhyaya, director of fixed income and currency strategy at Amundi US Inc.

The dollar’s rally has been fueled by speculation that Trump’s tariffs and tax cuts will fan inflation and add fuel to an economy the Federal Reserve has already been trying to restrain. That has caused traders to dial back expectations for how much the Fed will cut interest rates in the months ahead, driving up bond yields and giving oversees investors an incentive to shift money to the US.

The euro was also dragged lower by data showing European business activity unexpectedly shrank in November, which led traders to ramp up bets on interest-rate cuts from the European Central Bank.

The euro fell as much as 1.3% to $1.0335 before recovering to about $1.04. A growing number of strategists see a risk the it will reach parity with the dollar. The Swiss franc dropped as much as 1% against the greenback Friday.

This dollar gauge rose 0.4% this week. The Trump trade will dissipate by the end of December and the focus will return to macro factors, though those are also supportive of the dollar, according to Invesco.

“From max bullish on the dollar, we have transitioned to a moderate bullishness on the dollar,” said Alessio de Longis, a senior portfolio manager at Invesco. “We are slowly but steadily taking profits on our dollar overweights and going to a more neutral stance.”

Deutsche Bank said that not all of Trump’s policies have been priced in and the dollar has more room to go up. A “maximalist” scenario where Trump enacts his most extreme policies is only 30% priced into financial markets, according to George Saravelos, global head of FX Research at Deutsche Bank.

Hedge funds also added to bearish wagers against the euro in the week ending Nov. 19.

“Dollar strength is very hard to fight and positioning has certainly moved this way, but we are not yet at peak bullishness,” said Skylar Montgomery Koning, a currency strategist at Barclays Plc in New York. “The full implementation of Trump’s tariff proposals against countries with large trading surpluses in goods with the US implies large dollar gains across the board, with the euro in particular heading towards parity.”

--With assistance from Guy Johnson and Carter Johnson.

(Updates with speculative bets starting from second paragraph)

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