Traders prepared for a sudden collapse of the dollar after the US elections


The largest currency traders are warning about the possibility of a collapse of the dollar to other currencies after the November US presidential elections, according to Bloomberg. In particular, JPMorgan Chase & Co., the second-largest currency trader in the world will not preclude the flight of investors in such currency as the Euro and the yen, amid radical changes in the trade policy of the United States. Strategists at Deutsche Bank AG, HSBC Holdings Plc and Credit Suisse Group AG also assume that trade conflicts and political uncertainty will weaken the dollar.

JPMorgan Chase & Co warned that, regardless of who wins the elections, the growing tension between Washington and its major trading partners may lead to flight of investors from the dollar, says Bloomberg. The two key candidates — Hillary Clinton and Donald trump — promises major changes in trade policy. Trump in pre-election rhetoric calls to officially recognize China a currency manipulator, to impose countervailing duties on Chinese exports, as well as set a 35 per cent import duties on products of American companies who moved their production to Mexico. Hillary Clinton, in turn, promises to introduce the position of chief trade Prosecutor, to triple the number of law enforcement officers, specializing in trade, solve the problems that the United States posed by China and to deal with currency manipulation suffered by American workers.

When presidential candidates make antitorque rhetoric, foreigners begin to get rid of more risky assets, for which investors demand a higher risk premium results Bloomberg the opinion of Sanaba of Jālīnūs, head of direction “monetary policy strategy” the new York division of Credit Suisse. “Apparently, the dollar will fall in price”, — he said.

“Trade contradictions of a certain kind under the next President, we achieved big in case of a victory trump and moderate in Clinton,” said John Normand, head of research direction the currency, commodity markets and international bets” at JPMorgan.

Last week, hedge funds and companies for management of funds has reduced the number of bets on the appreciation of the dollar to 88,105 thousand contracts, from the data of the Commission on trade in commodity futures, who leads the Agency. The Bloomberg Dollar Spot index, which tracks the dynamics of the dollar against ten major currencies, grew 20% from mid-2014 to late 2015, when the Federal reserve system (FRS) the USA started to raise rates, and the Central banks of Europe and Japan stepped up measures to stimulate the economy. This year the dollar weakened by 5% against the background of sluggish U.S. GDP growth and international factors which allowed the fed to continue tightening monetary policy. The weakening of the dollar is at odds with forecasts of analysts by Bloomberg had expected growth of the U.S. dollar against the Euro and the yen.

The contradictions of the US and its trading partners in the past have had a negative impact on the dollar — historically during trade disputes, he was traded with a discount of up to 20%, says Bloomberg. After 1995, the US proposed to introduce import duties to 100% for vehicles of class “luxury” in Japan, the dollar was trading about 20% below the fair price, based on the dynamics of spreads on two-year interest rates of the US and Japan, according to data from JPMorgan. The dollar also weakened after 2000, when the candidate for US President George Bush promised voters to help the steel industry, after which the US imposed tariffs on imports of these products from the EU. Since the inauguration of Bush in January 2001 until July 2003, when the world trade organization (WTO) upheld the EU in relation to protective quotas imposed by the United States in March 2002 on imports of cold-rolled steel, the American currency has lost about 30%.