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Monday 4 December 2023 Dublin: 4°C
Richard Drew/PA

Here's how Trump's victory affected the dollar

One market analyst described it as “a bloodbath”.

WORLD MARKETS REACTED with a sharp initial downturn to Republican Donald Trump’s shock election win today, but they quickly recovered and the dollar remained surprisingly stable.

There were early losses for the dollar, but even amid the pre-result uncertainty, it remained stronger than many would have expected. Now, it stands at 1.09 against the euro.

Dave Donnelly, senior investment analyst at Cantor Ireland said the main driver of this was the move by investors towards what are know as ‘safe havens’”

“The dollar is a safe haven, the same as gold, which went up 2.5%. US government bonds are also seen as a safe haven”.

“So far, it’s actually a lot stronger than we would have expected. How long that’s going to be sustainable is questionable,” he added.

Had Hillary Clinton won the race, the forecast for the dollar over the next year would be more positive.

It was expected that the Federal Reserve would raise rates at its December meeting, but that was based on the belief that Clinton would be president. Now, experts believe that will be delayed until late 2017.

“That’ll see the dollar weaken,” Donnelly said.

The Fed has demonstrated an unwillingness to raise rates in times of uncertainty and market volatility.

He said now would not be the best time to buy dollars.

Trump’s policies will also create uncertainty for the markets and currencies.

In terms of domestic policy, he’s very pro-fiscal stimulus, he wants more government spending. He wants to spend more on infrastructure, on roads, on utilities. That should be quite stimulative to the economy. But, he also wants to cut taxes. A corporation tax cut – that’s quite stimulative for the economy too. It makes the US an attractive place to do business. He has to pay for all of this though, by increasing US debt levels.

Congress has, in the past, been reluctant in allowing the debt ceiling to be raised but now that both the House and Senate are to be held by his own party, Trump may not run into as much resistance.

“In the longterm, in order to support those higher debt levels, his plan needs to work. Growth really does need to come back in a substantial way to the US economy, otherwise he will have to raise taxes again,” Donnelly explained.

- With reporting from AFP. 

Read: How Donald Trump’s supporters reacted to the result>

Read: Building a giant wall, protecting gun owners and stopping immigration – here are the policies that got Trump elected>

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