The Greenback rally continued over the past few days in the aftermath of the Presidential election. The Australian Dollar has slid further against its US counterpart to the lowest level for five months.
Many assumed that there would be wide spread scepticism surrounding the prospect of a Trump administration and economic policies, causing the US Dollar to weaken significantly as a result. However, they couldn’t have been more wrong. In actuality, as mentioned in Thursday’s report the USD reached a 13 year high against a basket of major currencies last week. The US Dollar is generally considered to be a ‘safe-haven’ asset, which helps to prop up the value during tough times. Despite its staggering pile of debt, the US economy is seen as strong and dynamic and the political system is robust. It is world’s most liquid and widely used currency accounting for more than 40% of all daily FX transactions.
There are further logical reasons behind the strong Dollar in the wake of the election. Investors assume that a Trump administration will boost government spending, causing higher inflation and interest rates. Federal Open Market Committee chief Janet Yellen strengthened this viewpoint last week, indicating that a rate hike in December was increasingly likely. So this is a main topic that will be driving the markets over the coming weeks.