February 8, 2017 / 12:53 AM / 10 months ago

FOREX-Euro licks its wounds after skidding on political woes

* French election campaign in focus, pressuring euro

* Dollar pulls above more than 2-month lows vs yen hit overnight

* Investors await Trump-Abe meeting later this week

TOKYO, Feb 8 (Reuters) - The euro nursed losses in Asian trading on Wednesday, pressured by political woes in Europe ahead of elections that checked its recent ascent against the dollar.

France’s presidential race sank deeper into the mire of scandal after centrist Emmanuel Macron was forced to deny an extramarital affair and conservative Francois Fillon pressed on with efforts to salvage his reputation.

Uncertainty about the two rounds of the election on April 23 and May 7 drove the premium that investors demand for holding French over German government debt to its highest for almost four years.

Opinion polls show Macron slighly ahead of Fillon in the first round, but behind far-right National Front leader Marine Le Pen. She has vowed to pull France out of the euro zone and hold a vote on its membership in the European Union.

The euro edged down 0.1 percent against the dollar to $1.0671, after falling as low as $1.0656 on Tuesday, its lowest since late January and well below last week’s nearly two-month high of $1.0829.

Against the yen, the euro slipped 0.1 percent to 119.95 , after dipping to 119.545 overnight, its lowest since Dec. 5.

Elections will also be held in the Netherlands, Germany and possibly Italy.

However, the dollar’s gains are seen limited by the protectionist stance of U.S. President Donald Trump. Last week, Trump and a top adviser strongly criticized Japan, China and Germany, claiming they had all devalued their currencies to benefit their own countries.

“The uncertainty of the French presidential election is negative for the euro,” said Masafumi Yamamoto, chief FX strategist at Mizuho Securities in Tokyo.

“But on the other hand, Trump’s dollar policy is supporting euro-dollar. So with these two factors, I don’t see a strong sense of direction at the moment.”

The market shrugged off Ministry of Finance data showing Japan’s current account surplus stood at 1.11 trillion yen ($9.88 billion) in December, below economists’ median forecast for a surplus of 1.29 trillion yen in a Reuters poll.

The dollar was underpinned by news that China’s foreign exchange reserves unexpectedly fell below the $3 trillion level last month for the first time in nearly six years, even as Beijing has tried to curb outflows by tightening capital controls.

The dollar edged up to 112.43 yen, pulling away from its overnight low of 111.59 yen, its deepest nadir since late November, as investors awaited a meeting of U.S.-Japan leaders.

Trump will welcome Japanese Prime Minister Shinzo Abe on a U.S. visit later this week. Market participants await any remarks on currencies or on Japan’s fiscal or monetary policies that might emerge from their meeting, although trade and defense issues are likely to be in the spotlight. (Reporting by Tokyo markets team; Editing by Richard Pullin)

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