Here's why the dollar rose to a 4-month high after Trump's victory

The U.S. Dollar Index (DXY), which tracks the American currency's exchange rate against a basket of six other developed market currencies including the euro and the Japanese yen, rose 1.8% to around 105 at around 8 a.m. EST .30 US dollars, the highest level since the beginning of July.

And bond yields soared, with the benchmark 10-year Treasury note rising 16 basis points to a four-month high of nearly 4.5%, the biggest daily rise in 10-year yields since April; Higher bond yields signal a sell-off in fixed income as investors demand higher annual payouts to hold government debt.

The dollar's rise is partly a reflection of the protectionist trade policies advocated by Trump, and partly due to the Treasury Department shifting their money into riskier assets (see the early stock market gains), but there is also a more pessimistic reason for the moves .

“Whether it's true or not, the market views Republican control of Washington as a negative for debt and deficits,” Sevens Report founder Tom Essaye wrote in a note to clients on Wednesday, alluding to Trump's victory and the predicted a Republican majority in the Senate and a lead in the Senate in House races.

If this rising debt is indeed true, coupled with concerns about the impact of tariffs on goods prices, inflation could remain high for longer than previously expected, which in turn would likely lead to the Federal Reserve curbing its interest rate cutting cycle began in September, with Optimism about robust economic growth under Trump also pushed up monetary policy expectations, as stimulative interest rate cuts are less necessary when economic conditions are good.

So lower rate cut expectations are driving up bond yields as traders price in medium- and long-term rate cuts closer to today's 4.75% to 5%, and higher expected interest rates are simultaneously driving up the value of the dollar as the likelihood of cheap borrowing increases increases Costs decrease in low tariff environments.