Dollar Inches Up Amid Debate, Betting Odds Tilt Toward Trump

Last updated: June 28, 2024
Trump and Biden debate
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The US dollar edged higher on Friday, gaining as much as 0.2% before trimming its rise, marking the sixth consecutive weekly advance. President Joe Biden’s early stumbles in the debate raised concerns about his ability to compete against Trump in November.

Trump reaffirmed his promise to impose 10% tariffs on imports if re-elected, a move that could fuel inflation and delay interest-rate cuts, which might support the dollar.

“Markets likely extrapolated today’s debate outcome to the actual election outcome in November,” said Carol Kong, strategist at Commonwealth Bank of Australia. “Trump’s policies are likely to add to inflationary pressures and escalate trade tensions, thereby supporting US interest rates and the safe haven for US dollar.”

Asian currencies remained mostly steady, while the Mexican peso dipped nearly 1% before reducing its loss to 0.2%. Treasury yields nudged higher, and US equity futures saw modest gains ahead of the Federal Reserve’s preferred inflation measure.

Despite a slow start, Biden finished the debate strong, according to Vice President Kamala Harris. However, PredictIt’s live betting odds shifted in Trump’s favor, now giving him a 58% chance to win, up from 53% pre-debate.

While US consumer spending data due Friday could weaken the dollar, Mahjabeen Zaman, head of FX research at ANZ Bank in Sydney, expects it to remain resilient next week as investors prepare for election risks in France and the UK.

Asian equities were largely positive, with most regional stock markets gaining during the debate. Chinese benchmarks recovered early losses, moving away from correction territory as traders welcomed the absence of aggressive comments on China. The Hang Seng China Enterprises Index climbed up to 0.8%.

“It’s a positive surprise for this part of the world, but only moderately so,” said Redmond Wong, market strategist at Saxo Capital Markets. The approach to China depends not only on presidential candidates but also on Congress, suggesting a potential escalation of tensions ahead.

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