(Bloomberg) — The dollar (DX=F) rose to the strongest level in a year as Donald Trump won the race for the US presidency, triggering a sharp rise in Treasury yields on speculation his policies would keep US interest rates elevated.

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The greenback surged against all of its major counterparts as the rise in bond yields promised to pull cash into the US. The Bloomberg index climbed as much as 1.7%, the most in four years, hitting the highest since November 2023.

While Trump has advocated for a weaker dollar, investors believe his policies will fan inflation and slow the pace of the Federal Reserve’s rate cuts, ultimately boosting the greenback. He has promised to cut taxes and slap large tariffs on imports — hurting the currencies of some of America’s biggest trading partners.

“The Trump trade has been coming good this morning,” said Jane Foley, head of FX strategy at Rabobank. “Further dollar strength remains possible if a red sweep is confirmed.”

The euro was the worst performer among the Group-of-10 currencies, down as much as 2.1%, on fears about trade tariffs hurting European growth. The yen and Swiss franc were all weaker by at least 1%, while losses in the Mexican peso hit the 3.5% mark. Benchmark 10-year Treasury yields rose as much as 19 basis points to 4.47%.

The US currency’s gain came on the back of a building bond-market selloff on the view that higher tariffs would stoke price pressures and lead to a less aggressive pace of rate cuts by the Federal Reserve. Markets are pricing around 90 basis points of easing by June, down from around 150 basis points just over a month ago.

“Trump’s plan for tariffs and taxes should result in higher inflation and higher deficits and that should mean higher long end rates,” said Priya Misra, portfolio manager at JPMorgan Investment Management.

The close contest between Trump and Vice President Kamala Harris had elevated volatility in markets, where hedge funds and other traders plowed into so-called Trump trades — like betting against US bonds or the Mexican peso — for much of October before dialing the back this week.

A key question now is whether Republicans end up with the “trifecta,” meaning a situation where they gain control of the Senate, the House and the White House.

“That’s really what we’re watching for, the composition of Congress, because that will have direct implications for FX and rates,” said Laura Cooper, head of macro credit and global investment strategist at Nuveen. In the case of a so-called red sweep, “we’re looking at curve steepeners, probably more of that dollar bid.”

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As of Oct. 29, hedge funds and other speculative traders positioned for a further rally in the greenback, also spurred by a demand for haven assets of the election outcome. These funds, asset managers and other speculators held some $17.8 billion in bullish dollar positions, according to Commodity Futures Trading Commission data compiled by Bloomberg.

The surging dollar has already prompted some authorities in Asia to intervene to prop up their currencies. Bank Indonesia said it was ready to step in, while state-owned banks in China sold large amounts of dollars onshore to help support the yuan, according to traders.

Other analysts are also revising their currency forecasts to account for the stronger greenback. Deutsche Bank, which has long recommended that clients position for a weaker euro against the dollar, moved its year-end forecast for the pair to $1.05 from $1.08 in late September. Jordan Rochester, head of macro strategy in EMEA for Mizuho, said a Republican clean sweep could send the euro as low as $1.03 by December, lower than his previous forecast for $1.08.

—With assistance from Vassilis Karamanis, Anchalee Worrachate and Michael Mackenzie.

(Updates with Trump victory, latest market moves.)

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