The greenback has been rattled this week by political concerns, spurring debate over the long-term implications of Trump administration policies and their impact on demand for assets denominated in the world’s reserve currency. It’s a relatively unfamiliar dynamic for those accustomed to looking at bond-yield differentials when attempting to gauge the dollar’s outlook.
“I’m not sure serious analysis is possible, and I don’t trust my gut instincts on something as far from the usual state of affairs,” said Kit Juckes, a global strategist at Societe Generale SA in London and a veteran of more than three decades of market research. Juckes was referring, in a note Tuesday, to the dollar’s reaction to President Donald Trump’s selective travel ban.
While the dollar index is still higher than before the Nov. 8 election, it’s the foremost example of a “Trump trade’’ running out of steam in recent weeks. The S&P 500 Index of stocks remains near a record following an initial surge of optimism over Trump’s economic reflation program, and U.S. Treasuries are little changed over the same period.