In a surprising turn of events, the US dollar has experienced its biggest one-day rise against other major currencies since March 2020, as markets increasingly bet on a victory for former President Donald Trump in the US election. Concurrently, Bitcoin has reached an all-time high, reflecting the perceived investor sentiment towards a potential Trump presidency.

Riding the "Trump Trade" Wave

The Dollar's Meteoric Rise

The US currency's climb began after early indications of a Republican win in Georgia and gathered momentum throughout the day. The dollar index, which measures the currency against six major peers, including the euro and yen, advanced 1.63% to 105.04 as of 0615 GMT, reaching a four-month peak of 105.19. This surge puts the dollar on course for its best day since March 2020, a remarkable feat considering the economic turmoil caused by the COVID-19 pandemic.Analysts attribute the dollar's strength to the perceived inflationary impact of Trump's trade and immigration policies. The former president's protectionist approach, marked by tariffs and restrictive immigration policies, is seen as potentially fueling inflation, which in turn bolsters the US currency.

Bitcoin Reaches New Heights

Alongside the dollar's ascent, Bitcoin has also experienced a significant surge, climbing as much as 8.63% to reach a record high of $75,389. This rally is largely attributed to the perception that Trump is more actively supportive of cryptocurrencies than his opponent, Kamala Harris. Investors appear to be betting on a Trump victory, which could potentially lead to a more favorable regulatory environment for the digital asset.

Geopolitical Implications

The potential for a Trump victory has also raised concerns about the future of global trade and geopolitical stability. James Kniveton, a senior corporate forex dealer at Convera, noted that "trade-related currencies are likely to face the brunt of the Trump trade as markets prepare for a more volatile geopolitical environment and a resumption of the China trade war."Indeed, the Mexican peso and the Chinese yuan have already felt the impact of the "Trump trade." The US currency jumped as much as 3.36% to 20.7720 Mexican pesos, a more than two-year high, while it rose as much as 1.23% to 7.1860 yuan in offshore trading, the highest level in almost three months. These countries, along with others, stand to be among the hardest hit by the potential reinstatement of Trump's protectionist policies.

A Potential "Red Sweep"

Adding to the market's uncertainty is the possibility of a "Red Sweep," where the Republican Party retains control of the Senate and makes gains in the House of Representatives. According to Deutsche Bank analysts, "A potential unified government under President Trump would have the greatest degree of freedom for fiscal policy and would likely be the most dollar bullish outcome."Even without control of Congress, a Trump victory would still be "decidedly dollar bullish," the analysts said, due to the impact of tariffs and the dollar's outperformance against high-beta currencies, such as the Mexican peso and Australian dollar. The Australian dollar, for instance, slid as much as 1.87% to a three-month trough of $0.6513.As the vote counting continues and the final results emerge, the markets will closely monitor the implications of a potential Trump victory and the resulting shifts in the global economic and geopolitical landscape.