* Dollar climbs 0.7 percent vs yen
* Euro lingers just below $1.09
* Monday's French election-driven rise was biggest since
* Canadian dollar hit as US announces duties on Canadian
* Graphic: World FX rates in 2017 tmsnrt.rs/2egbfVh
By Jemima Kelly
LONDON, April 25 The dollar climbed as much as
0.7 percent against the yen on Tuesday, as investors regained
some risk appetite after the first round of the French
presidential election delivered the result they had hoped for
and that pollsters had forecast.
The Canadian dollar - or "loonie", as it is known by traders
- skidded to four-month lows after the United States imposed
duties on Canadian softwood lumber .
Centrist candidate Emmaneul Macron won the first round of
Sunday's election in France, sending the euro surging above
$1.09 as investors took heart from opinion polls showing
Macron would beat far-right rival Marine Le Pen - who threatens
to pull France out of the euro zone - in the run-off on May 7.
The single currency stayed close to a 5 1/2-month high of
$1.0940 hit the previous day, up 0.2 percent on the day by 1140
GMT at $1.0884, having finished Monday around 1.4 percent
higher, its biggest one-day climb since June.
The safe-haven yen, meanwhile, which investors tend to flock
to at times of risk aversion, fell around 0.7 percent to 110.55
yen to the dollar.
"(Markets are) risk-on – the French presidential election
was an obvious risk, and it now looks like, barring a shock,
Macron will gallop ahead and the market will have its candidate
in place, and that’s another hurdle overcome this year," said
BNY Mellon currency strategist Neil Mellor, in London.
The first-round outcome spared investors their worst-case
scenario of Le Pen facing off against far-left eurosceptic
Jean-Luc Melenchon, who had surged in the polls in recent weeks,
though he never broke into the top two.
That the pollsters - who had been criticised for failing to
predict last year's votes for Brexit and Donald Trump - had
accurately predicted Sunday's result bolstered confidence in
their projection that Macron would win the second round, by a
margin of 20 percentage points or more.
This increased confidence meant that political risk was
being priced out of the euro ahead of the second round, with
implied volatility - an option used to hedge against big future
price swings - having fallen sharply.
"This (second round) is going to be a non-event for the
market," said Commerzbank currency strategist Thu Lan Nguyen.
"Markets have pretty much priced out the risk of a Le Pen
victory, and rightly so, because the first round of the
elections has shown that the polls in France were correct ...
and this increases the confidence in the polls for the second
round ... It's highly likely that (Macron) is going to win."
Nguyen added that focus on the euro would now increasingly
turn to monetary policy. The European Central Bank meets on
Thursday, though it is not expected to announce that it is
winding down - or "tapering" - its asset-purchase programme
until later in the year, which should lift the euro.
Despite gains against most major currencies, the U.S. dollar
index, which is heavily exposed to the euro, slipped 0.1 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
(Reporting by Jemima Kelly; Editing by Larry King)