US Dollar Slips as Markets React to Tightening Trump-Harris Election Race

The US Dollar slipped on Monday as investors reduced positions tied to expectations of a potential Trump win in Tuesday’s presidential election. This shift comes amid polling data and prediction markets indicating a tighter race. Some of these markets now show increased support for Democrat Vice President Kamala Harris, who has gained traction on platforms like PredictIt, while Polymarket still indicates Trump as the favorite.

The market’s moves are influenced by Trump’s policies, which historically leaned towards higher tariffs and restrictive immigration measures. These policies are seen as inflationary drivers that could raise U.S. Treasury yields and, consequently, the dollar. Meanwhile, other currencies are projected to face increased volatility and risk if Trump’s trade policies re-emerge, which are seen as negative for global economic outlooks.

In currency markets, the dollar index fell 0.24% to 103.69, while the euro rose 0.6% to $1.0899. The dollar also dropped 0.76% against the yen, hitting 151.82. In addition, the Chinese yuan and Mexican peso showed strength, as each had previously weakened on concerns about new tariffs under a Trump administration. Implied volatility has surged for key currencies, with the euro/dollar’s one-week options volatility at its highest since March 2023, while the yuan and peso also showed significant volatility.

Bitcoin, meanwhile, saw a minor decline, down 1.21% to $68,359, reflecting broader risk adjustments in markets as election uncertainty continues.