The foreign exchange market analyst at DBS Bank, Philip Wee, stated in a research note issued on Tuesday that the risks of the U.S. elections are dominating the markets amid Trump's resurgence, reflecting a growing state of uncertainty which has led to a rise in the U.S. dollar and U.S. bond yields.

Recent polls have shown Donald Trump leading Kamala Harris for the first time in Pennsylvania and nearly catching up to Harris in Michigan, both key battleground states with no clear leanings or preferences for either the Republican or Democratic Party.

Thus, assuming Trump wins the U.S. presidential elections; the risks of a wider U.S. budget deficit are likely to increase, as calculations from the federal budget committee show that Trump’s proposed fiscal policies could result in a debt increase of $7.5 trillion over ten years, while Harris's plans could add $3.5 trillion in debt.

The economist further explained that the U.S. dollar may witness a rise due to potential increased tariffs if Trump wins the elections, with the dollar likely to strengthen significantly against Asian currencies in particular.

At the same time, Federal Reserve officials, including Schmid, Logan, and Kashkari, have called for a more gradual pace of federal interest rate cuts, creating a sense of uncertainty in the economy, which could bolster the dollar's strength.

Daly also emphasized that monetary policy remains constrained, indicating no reason to halt the interest rate cut cycle, as the economic analyst noted that markets are pricing in only 40 basis points of U.S. interest rate cuts by the end of the year.

Following the substantive adjustment, the dollar has risen by about 104 points, near its highest level since last August, and the U.S. dollar may not benefit as much from future expectations of rate cuts.