Election day is closing in and investors are betting on the U.S. dollar

demand for USD Interest rates have soared this month as Election Day approaches, investors brace for the potential outcome, and the Federal Reserve is likely to continue lowering rates in the coming months.

Through Monday, the dollar had risen in 14 of the past 16 sessions, marking its third straight week of gains on economic data that showed the labor market remained strong despite slowing inflation.

Report by JP Morgan Foreign exchange market analysts said in a statement on Monday that there was “strong” demand for the dollar and that “the dollar soared last week as the election surfaced.”

Analysts noted that demand for US dollar options against the euro, Mexican peso, Australian dollar and Singapore dollar was particularly strong. They say these currencies appear to be an election hedge, with the Australian dollar and Singapore dollar exposed to greater trade with China, the euro at risk of trade tensions, and the Mexican peso a historic election hedge. It was explained that.

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“There is still plenty of room to increase long the USD ahead of the election and if US economic data continues to put pressure on the Fed's accommodative policy,” the analysts said.

A report by JPMorgan analysts on Friday said the dollar had rebounded from a 5% decline from July to August. The paper said much of the dollar's rebound was due to the repricing of high yields on U.S. Treasuries, and that “not much of the U.S. election premium has yet been factored into the dollar.”

The analysis says that while the US dollar has room to appreciate due to “tariff risk, potential fiscal boost, and limited demonstrable risk premium,” it could temporarily underperform if tariff risk is factored in. added.

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The US dollar has appreciated in recent weeks. ((Photo Credit: Jakub Porzycki/NurPhoto via Getty Images) / Getty Images)

The sharp rise in the dollar federal reserve system is preparing to hold its next policy meeting after the election. The Federal Open Market Committee (FOMC), the central bank's policy arm, is expected to meet after voting day on Nov. 5 and announce on Nov. 7 whether to cut rates again.

after that Fed rate cut rate In September, the policy rate was lowered by 50 basis points and the benchmark federal funds rate was lowered from the range of 5.25% to 5.5% to the current range of 4.75% to 5%, but recent economic indicators have made it difficult to predict the size of the next rate cut. Questions have arisen.

Ministry of Labor September employment statistics The economy added 254,000 jobs, much more than economists expected, while the latest inflation data showed the cooling trend continued but at a slower pace than expected and prices It showed an increase of 2.4% from the previous year.

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The market is awaiting the Fed's next move on interest rates. (Yuki Iwamura/Bloomberg via Getty Images/Getty Images)

A resilient labor market and stubborn inflation have dampened investors' hopes for another rate cut at the Fed's November meeting. election day.

As of Monday evening, the market had priced in an 88.5% chance of a 25 basis point (bp) rate cut and an 11.5% chance the Fed would leave rates unchanged, according to the CME FedWatch tool. A month ago, the market believed there was a 50% chance that rates would be in the 4.25% to 4.5% range, which would require a further 50 basis point cut, and a 0% chance that rates would remain unchanged.

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Policymakers will have more data over the next two weeks. The Fed's preferred inflation gauge The October employment statistics will be released on October 31st, and the October employment statistics will be released the following day.

Reuters contributed to this report.