* Euro supported as solid data points to possible ECB
* Euro near 7-month high vs Swiss franc
* Dollar/yen near highest since mid-March
* Aussie hits 4-month low on weak data, soft commodities
By Hideyuki Sano
TOKYO, May 9 The euro pulled back from recent
six-month highs on Tuesday, but remained well-supported as
fading worries over political populism and signs of improving
economic conditions in Europe bolstered investor confidence.
The euro fell to $1.0921 from $1.1024, its highest
level in six months, hit in early Monday trade on relief after
centrist Emmanuel Macron's victory in France's presidential
"The euro's retreat was driven solely by profit-taking. I
think it is going to regain momentum over time," said Yukio
Ishizuki, senior currency analyst at Daiwa Securities.
Reflecting easing concerns over European politics, the
common currency gained against the safe-haven Swiss franc,
hitting a seven-month high of 1.0918 franc on Monday
and last stood at 1.0915.
Against the yen, it stood at 123.72 yen after
Monday's one-year high of 124.58.
With the French election out of way, investors are now
focusing on when and how the European Central Bank could scale
back its quantitative easing given the recent strength in the
euro zone economy.
The currency bloc's GDP growth in the first quarter, due
next week, is expected to have outpaced anaemic 0.7 percent
growth in the United States in the same period. Inflation jumped
back to 1.9 percent in April.
ECB board member Yves Mersch said on Monday that the central
bank is close to replacing its negative view on whether the euro
zone economy will reach growth targets with a neutral one, and
should adjust its policy guidance accordingly.
ECB chief Mario Draghi is also due to speak at Dutch House
of Representatives on Wednesday.
"I think Mersch gave us a big hint yesterday. Draghi has
been dovish so far but if he changes his tone, then we could see
a change of tide," said Kyosuke Suzuki, director of forex at
"In the coming two months or so, I think the euro is likely
to have the biggest upside potentials, given Draghi has tried to
manage market expectations in dovish direction, unlike the Fed,"
Improving risk sentiment supported the dollar against the
The dollar traded at 113.27 yen, near its highest
level since mid-March.
The immediate target for the dollar would be 113.40, the 50
percent retracement of its fall from the December peak of 118.66
to its April low of 108.13.
A break of that level opens the way for a test of 114.64,
the 61.8 percent retracement of the same decline and 115.51, its
recent peak hit on March 10.
Yet with a Federal Reserve rate hike in June almost fully
priced in, some market players say the dollar may struggle to
extend its rally further, especially given any stimulus by
President Donald Trump is unlikely to be put in place for
several months to come as he deals with a divided Congress.
"Aside from employment, we've seen some negative surprises
in recent U.S. data while the Fed marches ahead to a June rate
hike. I think the gap between the two will eventually bring down
the dollar," said Minori Uchida, chief currency analyst at the
Bank of Tokyo-Mitsubishi UFJ.
Uchida thinks the dollar could peak out at current levels in
the near term.
Elsewhere the Australian dollar dropped to as low as $0.7364
, its weakest level in four months, after local retail
sales posted a surprise drop of 0.1 percent in March despite
expectations of 0.3 percent rise.
The Aussie is also undermined by recent weakness in various
Although oil prices have rebounded this week after
dropping sharply late last week, to their lowest level since
November when oil produced announced output cuts, copper
hit four-month low on Monday on slides in Chinese imports.
Iron ore prices in China are also flirting with
"Resource prices are unstable. Eventually their instability
could be a source of a risk-off trend although it is not the
case now as the world's economic prospects look fairly good at
the moment," said Daiwa's Ishizuki.
(Editing by Sam Holmes)