Investors weighing on another Donald Trump presidency

LONDON

The dollar rose and Asia equities were mixed on Tuesday as investors weighed the possibility of another Donald Trump presidency after last week's poor debate performance by incumbent Joe Biden.

Bets on a second term for the controversial tycoon rose after the July 27 debate, in which he was widely considered to have come out on top after Biden struggled through answers and stumbled over his lines.

That led to calls for him to step down due to worries over his mental state, but Democrats have pushed back and are reportedly seeking a vote next month that would formally make him the party candidate for November's poll.

"Those two headlines, and given the reaction to President Biden's first debate, continue to suggest a Trump presidency is looking more likely at this stage," Tapas Strickland at National Australia Bank said in a commentary.

Observers said the prospect of another Trump presidency fueled talk of tax cuts and a fresh spike in inflation, pushing up yields and denting hopes for interest rate cuts.

That, in turn, boosted the dollar against its main peers, pushing back to 38-year highs against the yen, putting Japanese authorities on alert after they previously warned they were ready to intervene in forex markets to support the unit.

The euro was also a little softer, though it managed to hold most of the gains made on July 1 in a relief rally that came after the far-right National Rally (NR) looked unlikely to win an absolute majority in French legislative elections as had been feared.

However, Luca Santos at ACY Securities said: "Based on current results, the two most probable outcomes are a hung parliament.”

"The high number of constituencies won by the RN, coupled with tight races between left and centre candidates, complicates strategic withdrawals and heightens the risk of an RN cohabitation government, which would be less favourable for the euro.”