* Euro hits three-week high
* Sterling edges down after notching more than 6-month highs
* Aussie skids on falling iron ore prices
* Worries about French election, N. Korea loom in background
* Graphic: World FX rates in 2017 tmsnrt.rs/2egbfVh
By Jemima Kelly
LONDON, April 19 The euro hit a three-week high
on Wednesday, benefiting from a dollar weakened by lower U.S.
rates and doubts over President Donald Trump's promised fiscal
boost, while the prospect of a snap British election kept
sterling near a six-month peak.
After the British pound took centre-stage on Tuesday with
its second-largest one-day rise since 2008, the Australian
dollar was the biggest mover on major currency markets on
Wednesday, sliding 0.7 percent as iron ore prices took a dive
With the first round of France's presidential election just
four days away and the polls showing just a few points between
the top four candidates, analysts said any gains in the euro
would be capped, and the single currency was only marginally
higher on the day at $1.0837.
The main driver for that move, said strategists, was a
weaker dollar and the pricing out of the bet that the U.S.
Federal Reserve would raise interest rates three times this
That has come on the back of weaker-than-expected economic
data and doubts that U.S. President Donald Trump would deliver
on the tax cuts and relaxed regulation he had promised, a
package that traders had hoped would stimulate growth and
The dollar index, which measures the greenback against a
basket of six other major currencies, hit a three-week low on
Tuesday as 10-year Treasury yields fell below 2.2 percent to
their weakest levels since the U.S. election results, and
remained close to that level on Wednesday.
"What's happening is that the market continues to price out
the reflation trade in the United States," said Societe Generale
currency analyst Alvin Tan, in London.
"There are greater doubts now about large-scale fiscal
stimulus under the Trump administration, and on top of that the
U.S. inflation numbers have been disappointing."
U.S. Treasury Secretary Steven Mnuchin was quoted saying
Trump is "absolutely not" trying to talk down the strength of
the U.S. dollar in Wednesday's edition of the Financial Times,
playing down remarks by Trump in an interview last week when he
said the dollar was "getting too strong".
Sterling stayed less than a cent away from a peak of $1.2908
hit on Tuesday, the highest level since Oct. 3, after
British Prime Minister Theresa May called a snap election for
June, saying it would strengthen Britain's hand in negotiations
with the EU.
Tuesday's 2.2 percent jump saw the pound shatter a
months'-old trading range. It also cleared the 200-day moving
average for the first time since June, putting the squeeze on a
raft of speculative short positions.
"Sterling is rallying on the view that May will have a
stronger mandate, increasing her majority,...to deal with Brexit
negotiations and perhaps even calm the more extreme Brexiteers
in her party," wrote ING's head of global markets research,
Chris Turner, in a note to clients.
"We also think that poor positioning has played a major
role, where sterling shorts were built in the $1.22/24 region in
early March and are now being cut out."
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 Tokyo markets team)