April 19, 2017 / 11:36 AM / 6 months ago

FOREX-Euro propped up by weak dollar, sterling near 6-month high

* 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 (Recasts, adds new quote, updates prices)

By Jemima Kelly

LONDON, April 19 (Reuters) - The euro steadied on Wednesday near a three-week high against a dollar kept weak by lower U.S. rates and doubts over President Donald Trump’s promised fiscal boost.

The prospect of a snap British election, meanwhile, kept sterling near a six-month peak.

With the first round of France’s presidential election just four days away and 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 stakes for investors are high, with two anti-European Union, anti-euro candidates -- the far-right Marine Le Pen and the far-left Jean-Luc Melenchon - among the top four.

Strategists said if it were not for dollar weakness the euro would be showing greater sensitivity to the political risks surrounding Sunday’s first-round election. But it was being held up by the pricing out of the bet that the U.S. Federal Reserve would raise interest rates three times this year.

“There is a real risk that we get a choice between the far-left and the far-right, neither of which would be market-friendly, and both of which could leave the EU in a very different position than it’s in today,” said Rabobank currency strategist Jane Foley, in London, arguing that the market was too complacent.

The U.S. rate repricing has come on the back of weaker-than-expected economic data and doubts that Trump will deliver on the tax cuts and relaxed regulation he promised, a package that traders had hoped would stimulate growth and inflation.

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.

“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,” said Societe Generale currency analyst Alvin Tan, in London.

Against the yen, however, the dollar was half a percent stronger at 108.93, with demand for the safe-haven Japanese currency kept strong by worries over a host of geopolitical tensions, including between North Korea and the United States.

U.S. Treasury Secretary Steven Mnuchin was quoted saying in the Financial Times that Trump is “absolutely not” trying to talk down the strength of the U.S. dollar, 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.

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)

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