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Forex - Dollar off the lows, euro hit by French election uncertainty

3/7/2017, 9:51:38 AMBasics of Trading
Forex - Dollar off the lows, euro hit by French election uncertainty

Investing.com - The dollar recovered from one-week lows against a basket of the other major currencies on Monday, as the euro was hit by ongoing uncertainty over the outcome of the French presidential election.

The U.S. dollar index, which measures the greenback’s strength against a trade-weighted basket of six major currencies, was up 0.15% to 101.5 at 10.56 ET after falling to an almost one-week low of 101.23 earlier.

EUR/USD was last down 0.2% at 1.0600 after falling as low as 1.0577 earlier.

The euro touched the day’s lows after former French Prime Minister Alain Juppe, the most likely candidate to replace scandal-hit French presidential hopeful Francois Fillon, ruled himself out of the race.

Fillon has refused to give up his candidacy despite allegations that his wife was paid thousands of euros in public money to be his parliamentary assistant, but did very little work.

Opinion polls have shown that Juppe would have progressed into the second round of the election had he chosen to run, while former front runner Fillon is expected to get eliminated in the first round.

Outgoing President Francois Hollande was warned that far-right candidate Marine Le Pen could win the election and vowed to "do everything" in his power to stop it happening.

Investors’ fears that a victory for anti-EU Le Pen could potentially trigger a French exit from the euro zone.

Le Pen, the leader of the National Front, is likely to win the first round of France's election on April 23. Polls indicate she would then lose in the second-round run-off on May 7 to centrist Emmanuel Macron.

The dollar remained weaker against the safe haven yen, with USD/JPY down 0.24% at 113.77.

Demand for the yen was boosted after North Korea conducted missile tests early Monday, fueling risk aversion.

Political developments in the U.S. continued to dampen demand for the dollar after President Donald Trump on Saturday accused Barack Obama of wiretapping him during the 2016 election campaign.

Meanwhile, investors continued to weigh the prospects of a Federal Reserve rate increasethis month.

Fed Chair Janet Yellen said on Friday a rate hike "would likely be appropriate" this month if employment and inflation continued to evolve in line with expectations.

The remarks cemented the view that the Fed will raise interest rates at its next meeting on March 14-15.

Futures traders are pricing in around an 80% chance of a hike at the Fed's March meeting, according to Investing.com’s Fed Rate Monitor Tool.