February 6, 2017 / 4:03 PM / 6 months ago

FOREX-Euro declines amid political uncertainty; dollar dips vs yen

(Updates prices, adds comment, changes byline, dateline; previous LONDON)

* Euro struggles after Le Pen launches campaign

* Dollar down vs yen as U.S. yields fall

* Aussie slips on weak retail sales data

By Gertrude Chavez-Dreyfuss

NEW YORK, Feb 6 (Reuters) - The euro fell to a one-week low against the dollar on Monday on concerns over French politics ahead of the presidential vote in April as well as other impending elections in Europe in a year of political uncertainty.

"Political risk is serving to dampen the euro after last week's stumble from the $1.08 area," said Shaun Osborne, chief FX strategist, at Scotiabank in Toronto.

German factory orders rose 5.2 percent in December, the biggest monthly increase in 2 1/2 years, but the data had little market impact.

Investors were largely focused on French politics, as far-right National Front leader Marine Le Pen launched her presidential bid, vowing to fight globalization and take France out of the euro zone.

In Italy, another presidential election looms even as former Italian prime minister Matteo Renzi said he was willing to shelve his push for early voting.

In mid-morning trading, the euro fell 0.5 percent against the dollar to $1.0733. It dropped to $1.0705, its weakest level since Jan. 31.

The dollar, however, slid to its lowest in more than two months against the yen, pressured by a drop in U.S. Treasury yields, analysts said. The spread between U.S. two-year and Japanese two-year debt yields contracted to around 139 basis points on Monday, the narrowest in about two weeks, a positive for the yen.

PRESSURE ON DOLLAR

The dollar slipped 0.2 percent to 112.42 yen, and had earlier fallen to 112 yen, its weakest level since late November.

"A break of 112.00 yen to the downside in dollar/yen...would signal a more significant correction of the dollar rally, indicating that the greenback is no longer a sure way bet to rise this year," said Boris Schlossberg, managing director of FX Strategy, at BK Asset Management in New York.

The Australian dollar was the other biggest mover among the G10 currencies after weak retail sales numbers. It was last down 0.6 percent at US$0.7636.

Robust equity markets and the strength of U.S. economic data continue to back the bullish dollar calls that dominated at the end of last year, analysts said.

But a lack of details on expected pro-dollar tax and spending initiatives by the administration of U.S. President Donald Trump, combined with concern over the Trump White House's attitude to the dollar and global trade and security, has kept the currency on the back foot, for now.

"I'd like to hope that we naturally go back to buying the dollar, that seems the logical argument underneath it all," said Richard Benson, co-head of portfolio management with currency fund Millennium Global in London.

Reporting by Gertrude Chavez-Dreyfuss; Additional reporting by Patrick Graham in London; Editing by Bernadette Baum

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