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FOREX-Dollar loses more ground, euro jumps on French presidential debate
March 21, 2017 / 3:11 PM / 9 months ago

FOREX-Dollar loses more ground, euro jumps on French presidential debate

* Dollar index dips below 100, first time since early Feb

* Sterling surges after higher inflation print (New throughout, updates prices and market activity to U.S. market open; new byline, changes dateline, previous LONDON)

By Saqib Iqbal Ahmed

NEW YORK, March 21 (Reuters) - The dollar dipped to a six-week low against a basket of currencies on Tuesday, extending its slide from last week after the U.S. Federal Reserve’s comments disappointed dollar bulls.

A stronger euro also weighed on the dollar index, after centrist Emmanuel Macron’s performance in a television debate boosted a view he would win France’s presidential race over the far-right’s Marine Le Pen.

The dollar index, which measures the greenback against a basket of six major currencies, was down 0.7 percent at 99.724, having touched a low of 99.696 earlier in the session. It had risen in the weeks leading up to last Wednesday’s Fed announcement.

”Broadly the dollar continues to struggle after last week’s Fed statement which sounded a less hawkish tone than some had expected,” said Omer Esiner, chief market analyst, at Commonwealth Foreign Exchange in Washington.

The Fed announcement gave investors that were sitting on growing long dollar positions an opportunity to unwind those positions, Esiner said.

“It still looks like bit of a positioning, maybe consolidation driven move, more than any meaningful deterioration in the dollar’s longer-term outlook.”

Bullish bets on the dollar spurred by Donald Trump’s U.S. presidential win and his pledge on tax cuts, deregulation and infrastructure spending last November have been fully unwound, Bank of America Merrill Lynch currency strategist Myria Kyriacou said in a note.

The euro gained against the greenback, rising to its highest since Feb 2, boosted by French presidential candidate Macron’s performance in a TV debate. The euro was up 0.74 percent to $1.0816.

The prospect of anti-European Union, far-right candidate Le Pen delivering a surprise election win has rattled French bond markets this year and is a key source of political uncertainty for the euro.

“Any news between now and the French election next month that suggests fading risk of a Le Pen victory would probably be supportive of the euro,” Esiner said.

Meanwhile, sterling jumped almost 1 percent to its highest level in three weeks on Tuesday, after data showed British inflation in February above the Bank of England’s 2 percent target for the first time since the end of 2013. This was seen as boosting chances for a rate hike from the BoE.

Reporting by Saqib Iqbal Ahmed; Editing by David Gregorio

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