* Dollar drifts in tight range against yen, euro
* Aussie slips after weaker-than-expected Q4 capex data
* Eyes still on French politics as poll shows Le Pen gains
* Graphic: World FX rates in 2016 tmsnrt.rs/2egbfVh
By Patrick Graham
LONDON, Feb 23 The dollar traded close to
one-month highs on Thursday, as the lack of a clearer signal
from the U.S. Federal Reserve that it might raise interest rates
next month countered surprise praise from the new Treasury
Secretary for a strong currency.
It traded in tight ranges against the yen and the euro,
moving back above $1.05 against the single currency after a
pledge of support for centrist candidate Emmanuel Macron from
one rival soothed investor nerves about how France's
presidential election might pan out.
The political nerves that have affected trade in the single
currency were still in evidence, driving 2-month implied
volatility of the currency to the highest in a month as
contracts took in the first round of the election in April.
But the 3-month equivalent was down slightly from
post-Brexit vote highs hit on Wednesday, bolstering spot prices
for the euro.
A poll showing French far right leader Marine Le Pen was
only 10 points behind conservative Francois Fillon but 22 points
behind Macron in the potential second-round run-offs was not
enough to knock the single currency backwards.
"What we have seen later yesterday and this morning is some
euro strength," said Karl Steiner, a strategist with SEB in
"It will be interesting to see if the euro continues to be
dominated by French politics. That has certainly been the case
in the last few days."
By 0900 GMT, the euro was steady on the day at $1.0556
, up half a cent on lows hit in the European morning on
The dollar index, which measures its broader strength
against a basket of other currencies, was marginally higher on
the day at 101.32. That compared to a one-month high of
101.76 hit last week.
The big set piece overnight was the Fed's minutes, which
while not as hawkish as some in the market had hoped, just about
kept a March interest rate hike in play.
The Fed rarely delivers interest rate moves that are not
largely priced in by money markets and Fed funds futures show
the chances of a rise next month are still only around 20-25
percent. Any move in those expectations can be expected to push
the dollar higher after a listless few weeks.
New U.S. finance chief Steven Mnuchin told the Wall Street
Journal that the strong dollar was "a good thing" in the long
run, in contrast to a number of comments by officials in
President Donald Trump's administration that have weighed on the
currency in the past month.
That gave the greenback a boost before caution quickly set
"We have to remember Mnuchin was referring to the dollar's
long-term prospects, and that he did suggest before that too
strong of a dollar could have negative effects in the
short-term," said Masashi Murata, senior currency strategist at
Brown Brothers Harriman in Tokyo.
The dollar was down 0.2 percent at 113.10 yen in morning
trade in Europe.
The Aussie dollar, another mover overnight after some poor
capital expenditure numbers, was also down 0.2 percent at
$0.7690 having earlier fallen almost half a percent.
For Reuters Live Markets blog on European and UK stock
markets see reuters://realtime/verb=Open/url=http://emea1.apps.cp.extranet.thomsonreuters.biz/cms/?pageId=livemarkets
(Additional reporting by Shinichi Saoshiro in Tokyo; editing by