By Kevin Buckland and Harry Robertson
TOKYO/LONDON (Reuters) -The U.S. dollar rose to a four-month high against major peers on Tuesday, while Bitcoin extended its record rally as investors continued to pile into trades seen as benefiting Donald Trump’s incoming administration.
The euro languished at a seven-month low and the yuan fell to its lowest in more than three months, with Europe and China both targets of potential Trump tariffs.
The leading cryptocurrency bitcoin hit a new all-time high of $89,982 and was last at $87,330. Trump has vowed to make the United States “the crypto capital of the planet.”
“We are now in a regulatory wind zone,” said Gautam Chhugani, an analyst at research firm Bernstein. “We expect a crypto-friendly regulatory environment under Trump, starting with a pro-crypto SEC (Securities and Exchange Commission).”
The , which measures the currency against six peers, rose 0.38% to 105.83, around the highest level since early July.
“The market continues to push US equities, US interest rates and the dollar higher,” said Alvin Tan, head of Asia FX Strategy at RBC Capital Markets.
“Today the impetus is probably the fact that we had these reports that Trump is planning to appoint Senator Rubio and also Congressman Waltz as the top foreign policy officials, and they are known to be quite hawkish on China. ”
Sources told Reuters on Monday that Trump is expected to tap US Senator Marco Rubio as his secretary of state, perhaps the most aggressive option on the shortlist. Republican Rep. Mike Waltz, a critic of China, is expected to serve as national security adviser, sources said.
“It suggests that Trump is taking some of his tough policy proposals seriously,” Tan added.
They ended the domestic session at 7.2378 per dollar, the lowest close since August 1.
The dollar – which is usually influenced by the economic outlook for China, Australia’s main trading partner – fell 0.45% to $0.6545.
The euro fell to $1.0611 on Tuesday, its lowest level since late April, and was last down 0.34% at $1.0619.
Trump’s Republican Party will control both houses of Congress if he takes office in January, Decision Desk predicted Monday. That would allow him to push through an agenda of tax cuts and shrinking the federal government.
Trump has warned that the euro bloc will “pay a heavy price” for not buying enough US exports, with cars being a particular target. He has threatened China with blanket tariffs of 60%.
Potentially inflationary rates and immigration policies have caused markets to reduce the likelihood of a Federal Reserve rate cut on December 18 by a quarter of a percentage point to 69%, down from nearly 80% a week ago, according to CME Group’s FedWatch Tool ( NASDAQ:).
The euro is feeling added pressure from political uncertainty in Germany, the bloc’s largest economy. Germany will hold new elections on February 23, 11 weeks after the collapse of Chancellor Olaf Scholz’s governing coalition.
Sterling fell 0.36% to $1.2824 after data showed mainstream British wage growth slowed and unemployment rose, with the pound also feeling the heat from the dollar’s rally.
The dollar rose 0.23% to 154.04 yen. The Japanese currency fell to a three-month low of 154.715 per dollar last week.
