USD soaring as Trump outperforms – Large sell-off in emerging market currencies

The US dollar is trading higher against almost every currency in the world overnight on the news of the big outperformance in the polls from Donald Trump. Not only are markets positioning themselves for a comfortable Trump victory in the electoral college, but the prospect of a Republican controlled Congress, which is key in determining the ability of the incoming president to force policy changes through the US government.

We’re seeing particularly large sell-offs in emerging market currencies, as investors price in higher US tariffs, elevated geopolitical risks and greater global uncertainty under a Trump presidency. As was the case in 2016, the biggest loser of the night so far has been the Mexican peso, which is down more than 2% on the dollar. The CEE currencies are also being hit hard amid fears over European security, while many of those in Asia that are closely linked to the Chinese economy are trading more than 1% lower for the night.

The major currencies appear to have found a foothold for now, and the move upwards in the greenback has perhaps been slightly more contained relative to expectations. We would not be surprised, however, to see another bout of dollar strength as European markets open, and as the final results show what looks like to be a historical election victory for Trump and the Republican party.