(Bloomberg) -- For all of Donald Trump’s complaints about the dollar’s strength, he may have himself to blame.
One theory behind the greenback’s 2.8% climb so far this year has to do with the U.S. president’s soaring approval rating. While concerns about the coronavirus have certainly increased the demand for so-called safe haven assets like the dollar, there has also been a 70% correlation between Trump’s popularity and the U.S. dollar since his election, according to calculations from TD Securities.
That relationship has come into sharper focus as Trump’s approval rating has shot to 46%, the highest in three years, according to Real Clear Politics. It mirrors a similar relationship noted by Wall Street analysts as well between equities and Trump’s rising odds of re-election, as measured by prediction markets.
The U.S. currency has been more closely tracking stocks rather than falling Treasury yields, which would typically drag down the dollar, said Mark McCormick, global head of FX strategy at TD Securities.
“Regardless of how Trump feels about the dollar, he’s been good for the buck,” he wrote in a report. “It’s likely the case that U.S. risk assets, and by extension the USD, prefer the status quo to a progressive shift in the White House.”
The Bloomberg Dollar Index rose as much as 0.4% Thursday to touch its highest level in more than four months.
The Trump campaign has floated the idea of another round of tax cuts and, if re-elected, he would likely pursue a sizable infrastructure package, McCormick said. Similarly, a more centralist candidate such as Michael Bloomberg, who has been rising in the polls, would be “unlikely to upset the apple cart.” A progressive like Bernie Sanders, on the other hand, could pose a significant risk, the strategist said.
“Expect more two-way risks ahead,” McCormick said.
(Disclaimer: Michael Bloomberg is seeking the Democratic presidential nomination. He is the founder and majority owner of Bloomberg LP, the parent company of Bloomberg News.)
--With assistance from Felice Maranz and Ruth Carson.
To contact the reporter on this story: Katherine Greifeld in New York at email@example.com
To contact the editors responsible for this story: Jeremy Herron at firstname.lastname@example.org, Jennifer Bissell-Linsk, Nick Baker
For more articles like this, please visit us at bloomberg.com
Subscribe now to stay ahead with the most trusted business news source.
©2020 Bloomberg L.P.