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FOREX-Euro steadies after pop to 5-month highs on French election relief

Published 24/04/2017, 02:09 pm
© Reuters.  FOREX-Euro steadies after pop to 5-month highs on French election relief
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* Euro jumps as high as $1.0940 in early Asian trade

* Centrist Macron wins first round of French election

* DXY skids, but losses mitigated as safe-haven yen slips

* Investors warily monitor N. Korea tensions

TOKYO, April 24 (Reuters) - The euro pared gains after scaling a five-month high against the dollar on Monday after the centrist candidate won the first round of the French presidential election, reducing the risk of an anti-establishment shock in the final round.

The euro was up 1.1 percent at $1.0844 EUR= by midday in Asia after earlier rising as high as $1.0940, its highest since Nov. 10.

Centrist Emmanuel Macron, a pro-EU ex-banker and former economy minister, emerged as the leader of the first round of voting and qualified for a May 7 runoff alongside the second-place finisher, far-right leader Marine Le Pen. victory makes him the frontrunner in next month's election, and marked a huge defeat for the two centre-right and centre-left groupings that have dominated French politics for 60 years.

Against the yen, the euro jumped 2.1 percent to 119.34 EURJPY= , after touching a one-month high of 120.935.

Short-covering on election relief lifted the single currency and triggered stop-loss orders, market participants said, though the dust settled as the euro came off its early highs.

"We saw the big moves in the early trading hours when liquidity was thin, so we might not see anything dramatic for the rest of the Asian session," said Mitsuo Imaizumi, Tokyo-based chief foreign-exchange strategist for Daiwa Securities.

As the market braced for the election, net short positioning on the euro in the week ended April 18 increased to its largest since mid-March, according to calculations by Reuters and Commodity Futures Trading Commission data on Friday. IMM/FX

The euro's gains dented the dollar index, which tracks the U.S. currency against a basket of six rivals.

It slumped 0.8 percent to 99.179 .DXY , though its losses were mitigated as the greenback gained against the perceived safe-haven yen.

The dollar was up 0.8 percent at 110.03 yen JPY= , rising above the 110-yen level for the first time in nearly two weeks and logging an earlier high of 110.64.

Also underpinning the dollar, the benchmark 10-year U.S. Treasury yield rose to 2.308 percent US10YT=RR in Asian trade, up from Friday's U.S. close of 2.236 percent.

The French vote and the euro's rise come ahead of a European Central Bank policy meeting on Thursday, at which the central bank's ultra-easy stance is set to remain unchanged.

But with the first round of France's election out of the way, the focus of yen traders is once again turning to rising tension on the Korean peninsula, any flare-up of which could once again spark safety bids.

"It seems like the market's more concentrated on the Korea situation again," said Bart Wakabayashi, branch manager for State Street Bank and Trust in Tokyo.

"Should the yen be bought, if the Korean situation is so nearby? But buying the yen seems to be the established market reaction, and if you've been around long enough, you know you don't go against the market," he said.

South Korea said on Monday it was in talks about holding joint drills with a U.S. aircraft carrier strike group, as U.S. President Donald Trump called the leaders of Japan and China amid fears Pyongyang could conduct another nuclear test. Korea said on Sunday it was ready to sink a U.S. aircraft carrier to demonstrate its military might. market largely shrugged off Trump's promise on Friday that a "big announcement" was coming this week on overhauling the U.S. tax code. An administration official said on Saturday that the announcement will consist of "broad principles and priorities." will sign several executive orders on energy and the environment this week, which would make it easier for the United States to develop energy on and offshore, a White House official said on Sunday.

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