The euro rose against the dollar on Monday on signs that the French far-right will not win enough seats for an overall majority in parliamentary elections.
The single currency has come under pressure in recent weeks on concerns that Marine Le Pen’s National Rally will sweep to victory and push for high-spending policies that could put the country on a collision course with the European Union.
But while opinion polls showed the party was on course to win a majority in the 577-seat National Assembly, it was unclear whether it could muster enough to take full control.
President Emmanuel Macron called for a “broad” coalition against the far-right in the second round, where run-offs will be held where there was no clear winner in the first round.
The euro climbed to $1.0762 on Monday.
Meanwhile, the yen held its own against the dollar after the personal consumption expenditures (PCE) index — the Federal Reserve’s preferred gauge of inflation — fell further in May.
The UK’s economic recovery is improving as the election approaches
The reading gave renewed optimism that the Fed will cut rates this year, while traders are betting that the Bank of Japan will raise borrowing costs at its next meeting.
Traders are now looking ahead to the release of key non-farm payrolls at the end of the week.
“The door to a September cut is wide open, but three payrolls and three (consumer price indices) for the September meeting should pass without giving (decision makers) too much to be nervous about,” Taylor Nugent said in National Australia Bank.
“That is far from guaranteed.”
Traders are closely watching developments in currency markets after Japanese officials warned they were ready to step in to support the yen if it continues to weaken. The unit is trading just below 161 per dollar, having hit a 38-year low last week.
Yen weakens further to focus on Tokyo, Asian shares rise
Equity markets were mixed after a tepid lead on Friday from Wall Street, where all three major indexes struggled to hold on to early gains and closed slightly lower.
But they’ve been up impressively in 2024 so far, with the S&P 500 piling up more than 14 percent.
Tokyo rose in the morning session as the BoJ’s key Tankan survey of Japan’s biggest manufacturers showed business confidence rose for the first time in two quarters.
There were also gains in Seoul, Singapore, Taipei, Manila, Jakarta and Wellington, although Shanghai and Sydney slipped.
Hong Kong was closed for a holiday.
There was little major reaction to data showing Chinese factory activity shrank for a second straight month in June, underscoring continued weakness in the world’s number two economy ahead of a key policy meeting this month.
Keys around 02:30 GMT
Tokyo – Nikkei 225: UP 0.3 percent at 39,687.40 (break)
Yen gains after 38-year low, investors watch for intervention
Shanghai Composite: DOWN 0.1 percent at 2,964.40
Hong Kong – Hang Seng Index: Closed due to holidays
EUR/USD: UP at $1.0756 from $1.0715 on Friday
Dollar/yen: DOWN to 160.87 yen from 160.92 yen
GBP/USD: UP at $1.2660 from $1.2644
Euro/pound: UP at 84.91 pence from 84.71 pence
West Texas Intermediate: UP 0.4 percent to $81.90 a barrel
North Sea Brent crude: UP 0.4 percent to $85.35 a barrel
New York – Dow: DOWN 0.1 percent at 39,118.86 (close)
London – FTSE 100: Down 0.2% to 8,164,012 (close)
Source: AFP