By Wayne Cole

SYDNEY (Reuters) – U.S. stock futures and the dollar surged in Asia on Wednesday as investors wagered Republican Donald Trump could win the U.S. presidential election, though officially the race remained too close to call.

Trump took the early lead over Democrat Kamala Harris as solid Republican-leaning states reported first, but critical battleground races, in the handful of states likely to decide the election, were unlikely to be called for hours.

Treasury yields climbed to four-month highs as some betting sites swung to favour Trump, while futures markets were still confident the Federal Reserve will cut interest rates by 25 basis points on Thursday.

Analysts generally assume Trump's plans for restricted immigration, tax cuts, and sweeping tariffs if enacted would put more upward pressure on inflation and bond yields than Harris' centre-left policies.

Trump's proposals would also tend to push up the dollar while potentially restricting how far the Fed might ultimately be able to cut rates. Reflecting that, Fed fund futures for next year eased into the red with December down 11 ticks.

"As the early results come in, even though none of them are that surprising, we are seeing Treasury yields rising a little bit, the dollar strengthening, bitcoin up; kind of a classic Trump trade," said Brian Jacobsen, chief economist at Annex Wealth Management.

Yields on 10-year Treasury notes jumped to a four-month high of 4.443%, from 4.279%, breaking last week's top of 4.388%. Two-year yields climbed to 4.316%, from 4.189% late in New York.

"If we look at the long end of the curve, that reflects the fact that both candidates are not exactly fiscal conservatives, they're both willing to use the fiscal printing press," said Arnim Holzer, global macro strategist at Easterly EAB Risk Solutions.

"The biggest issue is if Trump or Harris are going to get full mandates," he added. "If they don't get blue or red sweeps, it limits the fiscal damage, and that's the best outcome for bondholders."

YUAN GIVES GROUND

S&P 500 futures climbed 1.2%, while Nasdaq futures added 1.3%. EUROSTOXX 50 futures firmed 0.5%, while DAX futures tacked on 0.7% and FTSE futures 0.5%.

MSCI's broadest index of Asia-Pacific shares outside Japan eased 0.6%, while Japan's Nikkei rose 2.2% as the yen slid.

In currency markets, the dollar index surged 1.5% to 104.97, the biggest daily rise since early 2023. The euro slid 1.6% to $1.0748, falling back from a one-month top of $1.0937 struck overnight.

The dollar firmed 1.5% on the Japanese yen to 153.94 yen, and further away from a low of 151.34.

The dollar gained 0.75% on the offshore yuan to 7.1375 yuan, sparking reports Chinese banks were selling dollars to slow the yuan's decline.

China is seen on the front line of tariff risk, and its currency in particular is trading on tenterhooks with implied volatility against the dollar around record highs.

Chinese stock markets have surged to almost one-month highs as investors expect a meeting of top policymakers in Beijing this week to approve local government debt refinancing and spending. Chinese blue chips firmed 0.4%, adding to recent gains.

Gold prices were choppy with a dip of 0.2% to $2,738 an ounce, off a recent record peak of 2,790.15.

Oil prices were down in Asian trade as markets nervously waited on the U.S. election results. They had risen overnight as a storm was expected to cut U.S. output in the Gulf of Mexico.

U.S. crude lost 26 cents to $71.73 per barrel, while Brent fell 32 cents to $75.21.