Analysts: Trump's coming to power will cause sharp fluctuations in the foreign exchange market

Foreign exchange traders are betting that Trump's policy agenda will cause wild swings in the $7.5 trillion-a-day foreign exchange market. While it's unclear how quickly Trump will implement policies, such as trade tariffs, that could deal a major blow to currencies like the euro, investors generally believe that unpredictability will be a key feature of Trump's term. There are also unknown factors, namely how countries will respond to Trump's measures and what impact those countermeasures will have on the market. Dominic Bunning, head of G-10 strategy at Nomura Securities, said: "Trump's potential policies are expected to create greater room for macroeconomic divergence, which will lead to greater foreign exchange volatility." Market expectations of a stronger dollar under Trump also support the argument that hedging costs will rise, because the correlation between the dollar and volatility is strongest when demand for the dollar is high. (Jinshi)