Forex market news: Dollar soars, euro, yuan battered

In forex market, the U.S. dollar hovered near a four-month high against major currencies on Tuesday, while Bitcoin extended its record-breaking rally as investors continued to flock to assets expected to benefit from the upcoming Donald Trump administration.

The euro remained near a nearly seven-month low reached overnight, while the yuan hovered around a more than three-month low, as both Europe and China were seen as key targets for potential tariffs under the incoming Trump administration.

U.S. Dollar Hits Four-Month High as Bitcoin Soars

The U.S. dollar index, which tracks the currency against six major peers including the euro, rose by 0.07% to 105.49 as of 0037 GMT, after reaching 105.70 on Monday—the highest level since July 3.

Bitcoin, the leading cryptocurrency, surged to a new all-time high of $89,637 on Tuesday. Trump has pledged to make the U.S. "the crypto capital of the planet," fueling optimism in the market.

"If history is any indicator, Bitcoin could easily reach $100,000 by the end of the year," said Kyle Rodda, senior financial markets analyst at Capital.com.

Meanwhile, Rodda noted that the expectation of strong U.S. economic performance, combined with the Trump administration’s aggressive trade policies, is continuing to drive the U.S. dollar higher.

"Markets are scaling back expectations of future Federal Reserve rate cuts, with even the possibility of a December rate cut now in doubt," he added.

On Monday, Decision Desk HQ projected that Trump's Republican Party would control both houses of Congress when he takes office in January, allowing him to push forward his agenda of tax cuts and reducing the size of the federal government.

Euro Drops to Lowest Level Since April Amid Political Uncertainty in Germany
The euro fell to $1.0629 overnight, its lowest level since April 22, before recovering slightly to $1.0658.

The shared currency is facing added pressure due to political instability in Germany, the Eurozone's largest economy. On Monday, Chancellor Olaf Scholz's coalition partner, the Greens, joined opposition calls for an earlier parliamentary vote, potentially paving the way for a snap election.

Sterling remained relatively unchanged at $1.28645.

The yen weakened, edging closer to last week's three-month low of 154.715 per dollar, slipping about 0.1% to 153.865 after a 0.7% decline the previous day.

China’s yuan steady as Trump trade fades

The Chinese yuan held steady on Monday, as expectations of additional economic stimulus and increased dollar-selling by Chinese exporters helped counterbalance the disappointment over Beijing's debt swap scheme.

However, yuan volatility could rise again next year, especially with Donald Trump returning to the White House. His potential policies, including threats of tariffs exceeding 60% on all Chinese goods, could heighten trade tensions and add pressure to the currency.

The yuan remained stable on Monday, following a sharp decline against the dollar after Trump's election victory.

The U.S. dollar has strengthened broadly in recent weeks, driven by expectations that Trump's policies will be inflationary, potentially limiting the extent of future rate cuts by the Federal Reserve.

At midday, the yuan was trading at 7.1838 per dollar, little changed from Friday’s close of 7.1860. It had fallen 0.8% last week amid concerns over potential tariff increases under the Trump administration.

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