Dollar Strengthens 3% After Election, Mirroring Early Trump Term Trends
Following U.S. President-elect Donald Trump’s convincing victory two months ago, the U.S. dollar has strengthened by more than 3%, echoing the patterns seen after his election in 2016. The DXY Index, which tracks the dollar against a basket of major global currencies, rose sharply in December 2016 before undergoing a steady decline over the following year, aligning with bitcoin’s (BTC) bull market in 2017.
This time, however, the dollar’s rise shows no signs of slowing down. Analysts believe that Trump’s anticipated economic policies and the Federal Reserve’s stance will continue to support the dollar’s upward movement.
While a stronger dollar is typically negative for risk assets, Trump’s expressed support for bitcoin has led to a counterintuitive rise in the cryptocurrency’s value since his election. Bitcoin recently reached record highs, though it’s currently trading about 10% below its mid-December peak of $108,300. According to Andre Dragosch, Bitwise’s head of research in Europe, bitcoin’s rally might slow, but its long-term potential remains intact.
“The Federal Reserve is stuck in a difficult position,” Dragosch said in an interview on X. “They risk a recession by doing too little too late, or they could ignite inflation if they act too quickly.”
Trump’s proposed tariffs on key trading partners are also expected to escalate global geopolitical tensions, driving further demand for the dollar, traditionally seen as a safe haven during uncertain times.
Additionally, the U.S. economy is outperforming many global markets, with GDP growth exceeding 3% and inflation running above target levels. This has kept the Federal Reserve’s interest rates high, with only two rate cuts projected for 2025.
“The markets are adjusting to the Fed’s reduced rate-cut outlook for 2025,” Dragosch noted. “This has fueled the dollar’s appreciation, led to rising yields, and created challenges for bitcoin, as broader macroeconomic conditions weigh heavily on the crypto market.”
