Investing.com – The U.S. dollar edged higher Monday, retaining recent strength as the US presidential election draws near and polls point to a rising likelihood of former President Donald Trump prevailing.

At 04:30 ET (08:30 GMT), the Dollar Index, which tracks the greenback against a basket of six other currencies, traded 0.2% higher to 103.462, after posting gains of around 0.6% last week.

Dollar boosted by Trump confidence

The dollar remained near its highest levels for over two months, boosted by increasing conviction that U.S. interest rates will fall at a slower pace than initially expected, especially as recent data showed the U.S. economy remained relatively healthy.

The showed traders have largely cemented a 25 basis point rate cut by the Federal Reserve in November.

The greenback has also been boosted by increased expectations that Donald Trump will defeat Kamala Harris in the 2024 presidential election, which is less than two weeks away.

Trump’s proposed tariff and tax policies are seen as likely to keep U.S. interest rates high and undermine currencies of trading partners.

“FX markets seem to be positioning for a Trump victory in next month’s US presidential election. October seems to have been a good month for Donald Trump in opinion polls and the dollar is bid across the board,” said analysts at ING, in a note.

Euro hit by weak German PPI

In Europe, edged 0.1% lower to 1.0850, after German producer prices fell more than expected in September, declining 1.4% year on year, instead of the 1.0% anticipated.

The European Central Bank is likely to cut its key interest rate down to its “natural” level between 2% and 3% but it may need to reduce it even further if a fall in inflation becomes entrenched, ECB policymaker Gediminas Simkus said on Monday.

“If the disinflation processes get entrenched… it’s possible that rates will be lower than the natural level,” Simkus, the Lithuanian central bank governor, told reporters in Vilnius.

fell 0.2% to 1.3022, after data showed that asking prices for British homes rose only 0.3% in October, well below their average for a 1.3% monthly increase for the month, according to property website Rightmove (OTC:).

This, along with the surprise fall in services inflation last week, points to back-to-back rate cuts by the Bank of England in the upcoming months as the central bank attempts to stimulate the British economy.

Yuan slips after PBOC cuts rates

rose 0.2% to 7.1120, after the PBOC cut its benchmark loan prime rate by 25 basis points, with Monday’s cut coming amid a flurry of recent stimulus measures from Beijing.

China has announced its most aggressive round of stimulus measures yet over the past month, outlining both monetary and fiscal measures to shore up sluggish growth. 

rose 0.3% to 149.91, but remained below 150 after having breached that key level briefly last week for the first time since early August.

Investing.com– Most Asian currencies moved in a tight range on Monday, with the yuan steady after the People’s Bank cut interest rates slightly more than expected, while the dollar remained near recent peaks. 

Regional currencies were nursing losses over the past few weeks as expectations of smaller U.S. interest rate cuts buoyed the dollar, as did signs of resilience in the U.S. economy.

The greenback hit an over 2-½ month high, with risk aversion before the U.S. elections also supporting the currency. 

Middling signals on Chinese stimulus also weighed on sentiment towards regional markets, while doubts over the Bank of Japan’s capacity to raise interest rates further kept the yen close to recent lows. 

Chinese yuan steady after loan prime rate cut 

The yuan’s pair hovered around 7.1019 yuan on Monday, following a strong midpoint fix from the People’s Bank.

The PBOC cut its benchmark by slightly more than expected, with Monday’s cut coming amid a flurry of recent stimulus measures from Beijing.

China announced its most aggressive round of stimulus measures yet over the past month, outlining both monetary and fiscal measures to shore up sluggish growth. This also made Monday’s rate cut largely expected by markets. 

But lower rates and more fiscal spending herald increased pressure on the yuan, especially with U.S. interest rates likely to remain higher than initially expected. 

Still, the prospect of more Chinese stimulus buoyed currencies with exposure to the country. The Australian dollar’s pair rose 0.1%, while the Taiwan dollar’s pair fell 0.4%. 

Other Asian currencies also saw some strength after recent losses. The Japanese yen’s pair fell 0.3%, but remained close to 150 yen, while the South Korean won’s pair was flat. 

The Singapore dollar’s pair fell slightly, while the Indian rupee’s pair remained above 84 rupees. 

Dollar steady near more than 2-½ mth high 

The and both fell slightly in Asian trade, but remained close to their strongest levels since early-August. 

The greenback was boosted by increasing conviction that U.S. interest rates will fall at a slower pace than initially expected, especially as recent data showed the U.S. economy remained strong. showed traders squarely positioned for a 25 basis point rate cut by the Federal Reserve in November.

The greenback also saw safe haven plays with less than three weeks left until the 2024 presidential elections. Recent polls pointed to a tight race between Kamala Harris and Donald Trump.