By Joseph Adinolfi, MarketWatch , Kosaku Narioka
Dollar up 9.2% against the Mexican peso this week
Dollar bulls owe President-elect Donald Trump a debt of gratitude.
A dramatic dollar rally that followed Trump's unexpected victory over Democrat Hillary Clinton has driven the greenback to its strongest weekly performance against the euro since February--and its best performance against the yen since July.
On Friday, the greenback added to its gains during the U.S. trading day, reversing a modest decline during the Asian session, as investors expected that the infrastructure spending promised by Trump would embolden the Federal Reserve to raise interest rates more quickly.
However, Fed Vice Chairman Stanley Fischer reiterated on Friday that interest rates would rise at a gradual pace (http://www.marketwatch.com/story/fischer-case-for-fed-interest-rate-hikes-quite-strong-2016-11-11). In theory, higher interest rates would support the buck by increasing the return on dollar-denominated investments.
The greenback has rallied sharply on the expectation that Trump's plans for increasing fiscal stimulus would embolden the Federal Reserve to raise interest rates more quickly. Despite reversing some of those gains on Friday, the greenback remained on track for its strongest weekly performance against the euro since February.
Read:Trump stock-market rally reflects expectations for new era of fiscal stimulus (http://www.marketwatch.com/story/trump-stock-market-rally-signals-new-era-of-huge-government-spending-2016-11-10)
The ICE U.S. Dollar index , a measure of the buck's strength against six of its biggest G-10 rivals, rose 0.3% to 99.0550 late Friday in New York. The euro slipped 0.3% to $1.0848, from $1.0885 late Thursday. The shared currency fell 2.6% this week.
One dollar bought Yen106.76 late Friday in New York, down 0.1% from Yen106.92 late Thursday. Despite Friday's drop, the greenback logged a weekly gain of 3.5% against the yen.
The dollar's gains accelerated in October as investors' expectations for a Federal Reserve interest-rate hike in December increased.
In a reversal of fortune, the British pound strengthened 0.9% to $1.2655, posting a weekly gain of 0.7%.
The euro weakened 0.8% to 86.05 pence late Friday, compared with 86.78 pence late Thursday in New York. Sterling is up sharply against the euro so far this week as investors worry that the populist movement that inspired Brexit and catapulted Trump to the presidency will soon spread to the Continent.
"More populist movements are taking hold in Europe as well, which increases the potential for more political turmoil," said Colin Cieszynski, chief markets strategist at CMC Markets.
EM selloff continues
Emerging-market currencies--most notably the Brazilian real and Mexican peso--have slumped against the dollar. a result of an expected shift toward protectionism in the U.S.
"Trump's victory wreaks havoc on EM assets, and MXN [the Mexican peso] has been leading the frenzied selloff across EM currencies," said Kit Juckes, chief currency strategist at Société Générale.
The dollar was up 1.2% at 20.77 pesos late Friday, after pushing the Mexican currency to a fresh all-time low earlier in the session. It traded at 20.52 pesos late Thursday. The dollar gained 0.9% to 3.42 Brazilian real, compared with 3.40 real on Thursday. For the week, the greenback was up 9.2% against the peso, and 5.9% against the real.
(END) Dow Jones Newswires
November 11, 2016 15:20 ET (20:20 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.