Now that Republican presidential nominee Donald Trump has emerged as the winner of the presidential election, the US dollar is falling against the Japanese yen, the euro, and the British pound, while surging against the Mexican peso.
The dollar is trading just above 101 yen to the dollar, down from over 105 earlier, or a more than 3% shift down today. According to data collected by Bloomberg, the volatility of the yen–dollar pair is the highest since the British European Union referendum vote.
While a currency moving a few percentage points may seem small compared to how a company’s stock swings, this shift is quite large in relative terms as currencies tend to trade daily within a fairly narrow range.
"When there’s a shock, then they will move away from those currencies, and then you have the euro, pound, and yen, which are major currencies people can buy. There’s a lot of liquidity in those markets and they’re seen as a fairly safe bet," said Will Shepherd, the head of currency trading at OFX, an Australian foreign exchange company.
The greenback fell more than 2% against the euro and fell similarly against the Swiss franc.
"Trump's trade rules will do some real damage to balance of payments, exports in those countries in the United States," Shepherd said, explaining why the Canadian dollar had fallen as well as the Australian dollar against the euro.
The disruptions in the currency markets are matching what's happening in stock markets across the world, except that markets can fall all at once, while currencies cannot. Japanese markets are down more than 5%, and futures for US stock indices are suggesting that we could be headed for one of the largest single-day declines in history. Reuters reported that a Japanese minister would consult the country's treasury minister "on how to respond" to the massive uptick in the yen.
But the most dramatic shift was charted by the Mexican peso, which plummeted more than 11% against the US dollar to record lows Tuesday night. That is the biggest decline since since Mexico's “tequila crisis” in 1994, according to the Financial Times. Earlier in the day, the Mexican currency had spiked nearly 1.4% before official election results began to be released.
This piece has been updated with more market data, quotes from Will Shepherd, and the comments from the Japanese minister.