Asian currencies tumble as projected Trump win propels dollar

Singapore’s dollar and Thailand’s baht slid the most among Asian currencies on Wednesday, while the Mexican peso hit a two-year low as the dollar surged on projections that Republican Donald Trump had won the US presidential election.

The Singapore dollar was last down 1.3 percent at a three-month low and set for its worst session since August 2015.

Thailand’s baht slumped as much as 1.9 percent to a two-month low, in its biggest one-day drop since February 2023.

The dollar was set for its biggest daily rise since March 2020 against major peers, and US Treasury yields also soared to multi-month peaks.

Fox News projected that Trump has won the US presidency defeating Democrat Kamala Harris, and Republicans took control of at least one chamber of Congress. Other media outlets were yet to call the race.

Meanwhile, the Pakistani rupee stood relatively stable at Rs277.72, according to the Exchange Companies Association of Pakistan (ECAP) at 10:06am.

Analysts view Trump’s proposed tariff and immigration policies as inflationary, and are therefore likely to put upward pressure on prices, bond yields and the dollar, and undermine the currencies of trading partners.

“The market is making positioning adjustments to prepare for a possible Trump victory,” said Ken Cheung Kin Tai, chief Asian foreign exchange strategist at Mizuho Bank.

“Regional investors are particularly worried about the impact from tariffs because most Asian economies rely on trade growth.”

The Chinese yuan and Mexican peso are seen as the most vulnerable to a stronger dollar and heavier tariffs under Trump.

The yuan was last down 0.8 percent, while the peso dropped as low as 20.7080 for the first time since August 2022.

MUFG analysts feel a Trump win would hit the South Korean won, Singapore dollar, Thai baht and Malaysian ringgit harder than other Asian currencies because of their export orientation and sensitivity to a potential slowdown in China’s growth.

The ringgit, Southeast Asia’s best-performing currency this year, was last down 1.5 percent.

Malaysia’s central bank kept interest rate unchanged, as expected, and said it was monitoring the US election and was prepared to manage market volatility and ensure orderly market conditions.

The Indonesian rupiah fell 0.7 percent to a nearly three-month low. The central bank governor said the short-term focus was on the rupiah’s stability amid the US election outcome.

An official said the central bank was also ready to stabilise the rupiah, including via steps such as intervention, if there was excessive volatility.

Regional stock markets were mixed, with equities in Manila down 1.2 percent, while those in Taipei rose 0.5 percent and Mumbai gained 0.9 percent.

‘Trump trades’ surge as Trump claims victory

Investors bought dollars, bitcoin and stocks, and sold bonds as Donald Trump claimed victory in the US presidential election and Republicans took control of at least one chamber of Congress.

US stock futures hit record highs, the dollar surged and Treasury yields jumped, while bitcoin broke $75,000 for the first time — all moves flagged by investors as likely should Trump win over Democrat Kamala Harris.

“Not only are markets positioning themselves for a comfortable Trump victory in the electoral college, but the prospect of a Republican-controlled Congress,” said Matthew Ryan, head of market strategy at Ebury.

The results so far underscore how one of the most unusual presidential elections in modern US history could have far-reaching implications for tax and trade policy as well as US institutions.

The results affect assets globally and will determine the outlook for US debt, the strength of the dollar, and a host of industries that make up the backbone of corporate America.

Growing confidence

Assets whose prices could be helped by Trump’s pledges to raise tariffs, cut taxes and slash regulations shone, while dealers said cash was flowing out of emerging markets and US Treasury bonds tanked in anticipation of a ballooning deficit.

“The consequence is a higher path of rates,” said Nick Ferres, chief investment officer at Vantage Point Asset Management in Singapore.

He was buying Asia-Pacific bank shares in anticipation that higher yields and stronger growth would benefit their earnings.

Bank stocks rose 4.4 percent in Tokyo and outperformed the market in Australia.

Ten-year Treasury yields — which move inversely to prices — flirted close to 4.5 percent.

“A lot of this is based on investors’ view that Trump would cut taxes or at least keep tax rates low. Now that it’s likely to be looking like a red sweep (of the White House and Congress) - additional cuts are possible,” said Ken Peng, head of Asia investment strategy at Citi Wealth in Hong Kong.

“Deregulation is another major positive for the economy and markets, particularly for the financial, energy, and tech sectors,” he said.

Bitcoin surged to a record high, betting on a softer line on cryptocurrency regulation.

‘Volatile night’

Tariff-exposed sectors fared less well. The Mexican peso, which could be hit by tariffs, sank to a two-year low, about 3 percent weaker than its closing price from the previous session.

The euro headed towards its biggest one-day drop since 2020 and German government bond yields staged their largest one-day drop since January, as investors priced in a sharp slowing in the economy.

In Asia, exporters’ shares slid in Hong Kong, pulling the Hang Seng index down 2.7 percent and leaving investors girding for a bumpy future.

“With Trump, market volatility is likely to pick up,” said Rong Ren Goh, portfolio manager at Eastspring Investments in Singapore.

“Right now the markets are focusing narrowly on the prospect of tariffs because it is the easiest lever to pull,” he said, but broader trade conflict was possible. “From this perspective, I think a foreign investor is likely to position more defensively towards China-focused risk.”

Shares in Tesla rallied sharply in Frankfurt, ahead of the US premarket. Elon Musk, Tesla’s top shareholder, has supported Trump throughout his electoral campaign.

Shares of Trump Media and Technology surged 10 percent in extended trade.

Elsewhere some bankers, investors and analysts said they were waiting out the count — in some cases anxiously — with friends and family.

SOURCE: REUTERS