Dollar rises with increase in future interest rates after Trump’s election

After the election that consecrated Donald Trump as the new president of the United States this Wednesday (6), effects on the economy are already noticeable. The biggest of them is the rise in the dollar, caused by the rise in future interest rates. They indicate the market's expectations regarding the country's basic interest rate, which is expected to remain high under Trump. It is worth mentioning that it is defined by the Federal Reserve, the US Central Bank.

Treasuries, income combined with interest rates, are considered the safest product in the world to invest in. Consequently, foreign investors put money into the United States and increase the value of the currency. In the last four months, the yield on treasuries reached a peak precisely on the day of Trump's election, at 4.47%.

Trump's proposals

The rise in interest rates is the result of what Trump has already said he intends to do when he assumes the presidency. Increase in import tariffs to protect the domestic market. Especially when it comes to Chinese products.

“There was already an impact from the perception of the risk of Trump's victory, with the expectation that he could impose import tariffs. Commodity exporters, such as Brazil, could also be affected”, said Luciano Costa (via G1), chief economist at Monte Bravo Corretora.

The attitude of keeping interest rates high seeks to control inflation, which could rise due to the rise in tariffs. Even so, it is possible that the price of products will be able to remain stable thanks to a tax reduction for companies. This also generates an increase in future interest rates, as the government's ability to cover debt payments is questioned.

_{Bitcoin reached historic highs with Trump's election (Photo: reproduction/MichaelWuensch/Pixabay)}

Fall of the Real and rise of Bitcoin

“The real was already one of the currencies that accumulated the most losses among emerging markets in recent days due to domestic issues, therefore, the space for devaluation was much smaller than in other cases, such as the Mexican and Chilean pesos”points out Matheus Pizzani (via G1), economist at CM Capital.

In Brazil, the devaluation of the real against the dollar has been happening for some time. Among other factors, it is a consequence of high government spending, which causes a public deficit. There is distrust in the market towards the country, which has very high bills. Without any signs of cuts, the dollar should continue to rise. Combined with this, yesterday (6), Copom raised the Selic rate again, which is now 11.25%.

On the other hand, the world's main cryptocurrency hit a record with Trump's election. Bitcoin reached US$74 thousand and reached its highest level in history. The future president is a defender of the currency and promises measures to boost it even further.

“If crypto is going to define the future, I want it to be mined, minted, and manufactured in the United States.”Trump said on the campaign trail.

Still, the Republican was not a supporter of Bitcoin in his first government. The change in stance involves purchasing cryptocurrencies for the same, according to experts.

Featured Photo: Dollar should continue to appreciate after Trump’s election (Reproduction/QuinceCreative/Pixabay)