The dollar climbed to a 3-1/2-month high against the yen on Thursday as markets weighed the election of businessman Donald Trump for U.S. president and how his policies could affect economic growth.
Traditionally seen as a safe haven, the yen sank as low as 101.19 on Wednesday when it became clear Trump had beaten Hillary Clinton and risk assets plunged. The dollar quickly regained its footing in choppy trade, helped in part by Trump's acceptance speech, which focused on unity and economic growth.
The greenback rose by more than 1 percent on the day to 106.90 yen for the first time since July in a stunning rebound against a basket of major currencies, trading up almost half a percent after brief initial losses on Trump's win.
"The dollar is taking back ground since yesterday’s election as market uncertainty was calmed by Trump’s more presidential tone in his victory speech," Caxton FX analyst Alexandra Russell-Oliver said.
While Trump's concilliatory tone boosted market expectations that the Federal Reserve will raise interest rates in December and supported dollar strength, markets are still struggling for a clear narrative on what the Republican's presidency will mean for global growth.
"Nobody really knows what he is going to do and we don’t even have any idea what his advisers are thinking," said currency strategist Lutz Karpowitz.
"Markets are waiting to see if and how he will implement some of the stranger ideas he spoke about during his election campaign. But he will definitely implement some of those ideas, which means that the current dollar strength won’t be sustained."
Others see substantial reasons to expect more broad dollar strength next year. Trump has promised tax reform, which may draw more U.S. corporate profits home, and higher fiscal spending and growth is expected to spur inflation and boost dollar interest rates.
The Chinese yuan weakened past 6.80 per dollar in the offshore market on Thursday for the first time in more than six years on fears that Trump will act on the protectionist rhetoric that ran through his campaign, particularly regarding trade with China. The yuan eased to 6.8259 against the dollar.
"For Asian currencies, the initial conclusions are somewhat negative, given the trade dependency of the region, if not on the U.S., then on China," HSBC strategist Paul Mackel said in a note.
The Australian dollar, hammered on Wednesday by concern over Trump's protectionist promises and their fallout for China and others, was back up by more than 1% against the greenback.
That was helped by better than expected mortgage data, though some analysts pointed to the potential for a boost in U.S. infrastructure spending to drive demand for the iron and other commodities Australia produces.
The New Zealand dollar was down almost 1% after the central bank cut rates on Wednesday and signaled the possible end to easing.
The euro earlier hit a two-week low of $1.0887, near its lowest against the greenback since Oct. 28.