* Options pricing still shows concern over election
* Dollar index firms off week’s lows
* C$ weakens as cooler inflation slams rate hike talk (Updates with U.S. market open; changes dateline from LONDON)
By Saqib Iqbal Ahmed
NEW YORK, April 21 (Reuters) - The euro edged lower against the U.S. dollar on Friday as investors braced for Sunday’s first round of a tight French presidential election.
The euro was down 0.2 percent against the dollar at $1.0693, close to the session’s low.
“Traders understandably look content to flatten their books and ride out the weekend’s events from the sidelines,” Omer Esiner, chief market analyst at Commonwealth Foreign Exchange in Washington, said in a note.
While the risk of a knee-jerk move one way or the other remained high, the euro was still on pace for its best week in 11 against the dollar.
An upbeat Purchasing Managers’ Index survey from France and polls showing centrist Emmanuel Macron still in pole position ahead of the vote helped settle investors’ nerves.
“We did see a decent amount of unwinding of some hedges,” said Brad Bechtel, managing director FX at Jefferies in New York. “Hedges have appreciated so much in the last week or so that some folks are comfortable taking a little bit off.”
However, the options markets still suggests investors are concerned about the chances of strong results for far-right candidate Marine Le Pen and far-left rival Jean-Luc Melenchon.
The dollar, which has been pressured lately by weaker-than-expected economic data and worries about the Trump administration’s ability to pass tax and fiscal stimulus legislation, rose on Friday as traders squared up positions ahead of the weekend.
The dollar index, which tracks the U.S. currency against a basket of six major rivals, was up 0.18 percent at 99.954.
“Even if we don’t get the Trump administration stuff, we still have a Fed that is hiking rates, balance sheet reductions still on the cards and the U.S. economy is still trucking along,” Bechtel said. “All these things are still generally dollar-positive.”
Against the yen, the greenback was down 0.33 percent at 108.95 yen.
The Canadian dollar weakened against its U.S. counterpart to a six-week low as cooler-than-expected domestic inflation reduced pressure on the Bank of Canada to consider interest-rate hikes.
Other major currency pairs were stuck in tight ranges, with Britain’s weakest quarterly retail sales number in five years doing minimal damage to sterling after a 4-cent surge earlier this week. Sterling was down 0.2 percent at $1.2782.
Editing by Lisa Von Ahn