U.S. dollar rallies to 11-month high amid Trump policies, rate hike expectations

The U.S. dollar rose to an 11-month high against other major currencies on Monday, as U.S. President-elect Donald Trump's potential economic policies boosted market expectations of further interest-rate increases.

The dollar index, which tracks the greenback against six major peers, was up 1.05 percent to 100.100 in late trading on the day, the highest in 11 months and also the first time to exceed 100 this year.

Analysts had predicted a rout in the greenback after a Trump victory as the Republican candidate may cause more instabilities in financial markets than his Democratic counterpart Hillary Clinton, who was seen as more predictable and was expected to follow President Barack Obama's steps in regulating the financial sector.

The dollar index slumped more than 1 percent on Tuesday's election night as the presidential race tightened. It then pared losses and increased for four consecutive sessions till Monday.

"The dollar rally is connected to U.S. interest rates going up," said Robert Savage, CEO of CC Track Solutions, in an interview with Xinhua on Monday.

He added that the rate move reflects Trump's election and expected a policy shift to lower taxes and more spending leading to higher growth and inflation.

"This means we see a Federal Reserve rate hike in December and March." He said.

Analysts said the market has shifted its focus from the uncertainty of U.S. presidential election to economic prospects under a Trump administration: the rising possibility of tax cuts and a generally pro-growth set of policies, aided and abetted by the Republican clean sweep of Congress, raised market speculation for a revival in inflation as well as more rate hikes in the future.

Earlier this month, the Fed left interest rates unchanged amid uncertainty about market reactions to the outcome of the U.S. presidential election, but signaled that it could raise rates again as soon as in December.

Fed Vice Chairman Stanley Fischer also said recently that he expects U.S. rates to rise gradually.

"In my view, the Fed appears reasonably close to achieving both the inflation and employment components of its mandate," Fischer said at a conference at the Central Bank of Chile on Friday.

"Accordingly, the case for removing accommodation gradually is quite strong, keeping in mind that the future is uncertain and that monetary policy is not on a preset course," He said.

Analysts pointed out that the possibility of market volatility still remains even though a rate hike in December is almost guaranteed.

"The Trump election was a surprise and his policies are uncertain particularly regarding trade. Until we know more about Trump we will remain volatile." Savage said. Endit