The dollar reached the strongest level in a year as Donald Trump pulled ahead in the US presidential race, triggering a sharp rise in Treasury yields on speculation his policies would keep US interest rates elevated.

The greenback surged against all of its major counterparts as the rise in bond yields promised to pull cash into the US. The Bloomberg index was up as much as 1.7%, the most in four years, and hit the highest since November 2023 before paring the move.

While Trump has advocated for a weaker dollar, investors believe his policies will fan inflation and slow the pace of the Federal Reserve’s interest-rate cuts, ultimately boosting the greenback. The former President, who is projected as the winner across pivotal swing states, has promised to cut taxes and slap large tariffs on imports — hurting the currencies of some of America’s biggest trading partners.

“Trump’s plan for tariffs and taxes should result in higher inflation and higher deficits and that should mean higher long end rates,” said Priya Misra, portfolio manager at JPMorgan Investment Management.

The euro was the worst performer among the Group-of-10 currencies, down as much as 2.1% to the lowest since June. The yen, Australian dollar and Swiss franc were all weaker by at least 1%, while losses in the Mexican peso hit the 3% mark. Benchmark 10-year Treasury yields were up 16 basis points at 4.43%.

The US currency’s gain came on the back of a building bond-market selloff as traders re-calibrated the odds of what has been a neck-and-neck race between Trump and Vice President Kamala Harris.

The close contest has elevated volatility in markets, where hedge funds and other traders plowed into so-called Trump trades — like betting against US bonds or the Mexican peso — for much of October before dialing the back this week as Harris posted some strong showings in opinion polls.

A key question now is whether Republicans end up with the “trifecta,” meaning a situation where they gain control of the Senate, the House and the White House.

“That’s really what we’re watching for, the composition of Congress, because that will have direct implications for FX and rates,” said Laura Cooper, head of macro credit and global investment strategist at Nuveen. In the case of a so-called red sweep, “we’re looking at curve steepeners, probably more of that dollar bid.”

As of Oct. 29, hedge funds and other speculative traders positioned for a further rally in the greenback, also spurred by a demand for haven assets of the election outcome. These funds, asset managers and other speculators held some $17.8 billion in bullish dollar positions, according to Commodity Futures Trading Commission data compiled by Bloomberg.

The surging dollar has already prompted some authorities in Asia to intervene to prop up their currencies. Bank Indonesia said it was ready to step in, while state-owned banks in China sold large amounts of dollars onshore to help support the yuan, according to traders.

Analysts are also revising their currency forecasts to account for the stronger greenback. Deutsche Bank, which has long recommended that clients position for a weaker euro against the dollar, moved its year-end forecast for the pair to $1.05 from $1.08 in late September.