Donald Trump, his impact on FX market (selected)

Donald Trump and His impact on FX Market (chosen slides)

Lim Hyuck Ju, Lee Jeong Hyun, Jeong Seung Won, Kasparava, Yeva

Famous businessman

The president of The Trump Organization

Famous Reality TV Star

And now, the Presidential Nominee of the Republi-can Party

Who is Donald Trump?

It wasn’t the first time Trump had interest in a presidential run

1987 1999 2004 2008 20162012

• Birther Movement :Trump said that he was skep-tical of Obama’s citizenship (in 2011)

Who is Donald Trump?

How he can be a presidential nominee of U.S.

Real Median Household Income in the United States :

The standard of living of the Middle Class has no difference com-pared to 20 years ago

Source: US. Bureau of the Census

Over the period 1990 to 2013 the real earnings of those with lower levels of education have tended to decline. Furthermore, men without the degree become worse than similarly educated

women


Among the Middle Class, especially “white working and middle class” called WWMC has supported Donald Trump. They believe the real income has not raised because of 3 main reasons:

1. Increased Immigrant

2. U.S Company’s Transfer abroad

3. Persistent Trade Deficit



Trump‘s economic views - Protectionism

Stop/touphen trade agreements with main partners to beat trade deficits

U.S. Trade Balance in billions $:2015 2016 China - 367 - 225Japan - 69 - 46Mexico - 60 - 41South Korea - 28 - 21


■ Exit NAFTA, if not regonitiate


■ Withdraw from Trans-Pacific Partnership

■ Onshoring vs. Outsourcing (15% tax for outsourcing jobs 20% tariff on imported goods)

■ Abolish US-South-Korean free-trade deal?

Trump‘s economic views - China Opposition

■ Bring trade cases against China in WTO upon subsidies policy■ Label China as a currency manipulater■ Toughen rules against Intellectual Property Theft

Effect on FX market

Effects on Mexican peso – Depreciation

Mexican peso is a sensitive cur-rency about US election 9/26 first presi-

dential debate10/9 second presidential debate

Depreciation when Trump's approval rat-ing goes up

Appreciation when Hillary superior than Trump in debates.

10/19 third presi-dential debateUSD/MXN

Effects on Australian Dollar – Depreciation

America’s protectionism → the other’s retaliatory tariffs→ volume of world trade decrease → recession→ demand of raw materials decrease and price drops→ Australian economic depression

■ Australia has abundance of raw materials like iron ore, coal, LNG etc.■ China is the biggest Australian importer

Effects on Japanese Yen – Appreciation

■ After Brexit, Japanese Yen appreciation because JPY is one of the safe asset.

■ Trump is also uncertainty for the markets

■ People invest their money in safe asset like Japanese Yen

§ For same reason men-tioned above, Gold price also goes up

Effects on Korean Won - Depreciation

■ Korean Won is a risky asset

■ Renegotiation of Korea-US FTA

■ Protectionism targeted at China hurt Chinese economy and China is Korea's major trading nation

■ Only bad news for Korea because of the export-oriented developing economy

Where to invest?

What if Trump is elected – Investment Suggestion: Cur-rency

Short the Mexican peso and go long the Russian ruble

: Trump plans to build a wall along the Mexican border, de-port all undocumented immi-grants and scrap NAFTA This would be bad news for the Mexican Economy

: Trump has suggested that he could ease up on the Western sanctions that have been weighing on the Russian economy

What if Trump is elected – Investment Suggestion: Cur-rency

Short the Canadian dollar and go long the Japanese yen

: Trump’s urge to end NAFTA would also hurt Canada. The US is Canada’s biggest trading partner purchasing $338 billion of Cana-dian goods and services last year

: Yen is generally considered a safe asset that investors buy during times of turmoil.

What if Trump is elected – Investment Suggestion: Currency & Commodity

Short the Korean won & Buy Gold

: The trade agreement between Korea and the U.S. signed in 2012 could be hurt because of Trump’s Protectionism. Trump called it a “Job-killing trade deal” So the Ko-rean won could come under pres-sure.

: Trump is an unconventional presidential candidate. He will sow uncertainty about the US economy. So, if he win, many trader are going to buy tradi-tional haven asset, gold like yen in Japan.

Economy & Finance

Donald Trump, his impact on FX market (selected)