(Bloomberg) — The dollar edged higher in Asian trading as markets assessed that former President Donald Trump was the victor in the first U.S. presidential debate.
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Bloomberg’s gauge of the U.S. currency rose as much as 0.2% on Friday before paring the move, with the index on track to post a sixth straight weekly gain. President Joe Biden stumbled in the early exchanges of the debate, a performance that may intensify concerns about his ability to defeat Trump in the November election.
Trump reiterated his promise to impose 10% tariffs on imports if he wins in November, a move that could put upward pressure on inflation, potentially delaying interest rate cuts that could weigh on the dollar.
“Markets probably extrapolated the outcome of today’s debate to the actual outcome of the November election,” said Carol Kong, a strategist at Commonwealth Bank of Australia in Sydney. “Trump’s policies are likely to increase inflationary pressures and increase trade tensions, thereby supporting US interest rates and the safe haven of the US dollar.”
Asian currencies were mostly flat, while the Mexican peso fell nearly 1% before paring its loss to 0.2%. Treasury yields edged higher, while U.S. stock futures posted a modest gain ahead of the Federal Reserve’s preferred inflation measure later on Friday.
While the debate got off to a slow start for Biden, it was a strong finish, Vice President Kamala Harris said. But PredictIt’s live betting odds have swung in Trump’s favor: He is now considered to have a 58% chance of winning the November vote, up from 53% before the debate began.
While the dollar could weaken if U.S. consumer spending data due on Friday shows some easing, it is likely to remain supported next week as investors brace for election risks in France and the U.K., said Mahjabeen Zaman, head of currency research at Australia & New Zealand Banking Group in Sydney.
Sentiment in Asian stocks was generally upbeat, with most regional stock markets advancing during the debate. Chinese benchmarks recovered early losses and moved away from technical correction territory as the lack of hawkish comments on China was seen as a positive surprise by traders. The Hang Seng China Enterprises Index rose as much as 0.8%.
It is a “positive surprise for this part of the world, but only moderately so,” said Redmond Wong, market strategist at Saxo Capital Markets. Political consensus on how to deal with China depends not only on presidential candidates but also on Congress, he said, adding that there could be some escalation of tensions in the coming months.
The lack of aggressive comments on China was “probably a surprise, but the anti-China stance is united and bipartisan, so there is probably not much to attack each other,” said Xin-Yao Ng, chief investment officer at abrdn.
(Updates currency movements in fifth paragraph and adds comments)
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