Published : 4 weeks ago, on 12/11/2024

By Hannah Lang and Chibuike Oguh

(Reuters) -The euro dropped to its lowest level in nearly seven months against the U.S. dollar on Monday, weighed down by investor worries about possible tariffs by a new White House administration which could hurt the euro area’s economy.

The euro has edged lower since Donald Trump won the U.S. presidential election last week, sparking concerns about possible tariffs by his incoming administration.

Several media outlets reported on Friday that Trump was lining up Robert Lighthizer, seen as a hawk on trade, to return to his previous post of running trade policy, which further weighed on the currency. Sources familiar with the matter said Trump has not asked Lighthizer to return to the agency overseeing trade policy.

“What’s going on today is just an extension or continuation of what’s been going on since the election,” said Eugene Epstein, head of trading and structured products, North America, at Moneycorp in New Jersey.

“Every country or multi-country union that is facing any potential threat in tariffs is really having a hard time against the dollar.”

The EU’s single currency was down 0.61% at $1.0654. It had dropped as low as 1.0629, the lowest level since mid-April this year.

Meanwhile, the U.S. dollar index – a measure of the dollar’s value relative to a basket of foreign currencies – slightly overshot the highs seen right after the U.S. presidential election, with markets still waiting for clarity about future U.S. policy.

The dollar index was 0.48% firmer at 105.51, after hitting 105.70, its highest level since July. Last week, it jumped more than 1.5% to 105.44, after U.S. election results showed Trump’s victory.

It does feel like the markets are pricing in a red wave more and more,” said Bipan Rai, managing director at BMO Global Asset Management, referring to Trump’s Republican Party. “I think the dollar is the beneficiary of that.”

Measures expected to be taken by the U.S. president-elect – including tariffs and tax cuts – should put upward pressure on inflation and bond yields while limiting the Fed’s scope to ease policy and supporting the greenback.

“One of the key questions after the election is, ‘What’s going to be at the top of the legislative agenda for the Trump administration?'” Rai said. “And it feels more and more like it’s going to be tariffs, which, of course, he can pretty much push through without needing Congress on his side to help him do that.”

The dollar gained 0.69% on the yen to 153.69, having been dragged off last week’s top of 154.70 by the risk of Japanese intervention. On Nov. 6, it hit 154.68, its highest level since July.

A summary of opinions from the Bank of Japan’s October policy meeting showed members were unsure on when to raise rates, also due to political uncertainty.

Bitcoin soared to a record high above $87,000 on Monday on expectations that cryptocurrencies will boom in a favourable regulatory environment following the election of Trump as president and crypto candidates to Congress.

Bitcoin gained 13.95% to $87,215.00. Ethereum rose 14.27% to $3,363.80.

The U.S. bond market is closed for a public holiday on Monday, though stocks and futures are open.

(Reporting by Hannah Lang and Chibuike Oguh in New York and Stefano Rebaudo in Milan; Editing by Chizu Nomiyama, Ed Osmond and Matthew Lewis)