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FOREX-Euro gives up gains as Macron seals French election victory

Published 08/05/2017, 01:21 pm
Updated 08/05/2017, 01:30 pm
FOREX-Euro gives up gains as Macron seals French election victory
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* Euro pulls away from 6-month high vs dollar, 1-year high vs yen

* Dollar index rises above 6-month low plumbed earlier

TOKYO, May 8 (Reuters) - The euro pulled away from highs hit early in the Asian session on Monday as investors took profits from its gains after centrist Emmanuel Macron's victory over the far-right Marine Le Pen in France's presidential election.

Macron's resounding defeat of a nationalist who had threatened to take France out of the European Union brought relief to investors who had feared another populist upheaval after Britain's vote to exit the European Union and Donald Trump's election to president last year. margin of victory appeared even larger than expected. With most votes counted, he had garnered around 65.5 percent against Le Pen's 34.5 percent - a wider gap than the 20 or so percentage points pre-election surveys had suggested.

The euro had been on a rising trend in the days ahead of the election, as investors began to position for a Macron victory.

"The market already priced in the victory of Macron," said Masafumi Yamamoto, chief currency strategist for Mizuho Securities in Tokyo, as U.S. Treasury yields rose. "We saw some additional rise of the euro this morning, but considering the difficulty for Macron's party to get a majority in the national assembly election, he may not bring higher growth."

Looking at positioning in the euro, he said, "the market has squared its short positions, but there are no fresh reasons to take long positions, as there will likely be no new positive developments, and limited scope for upside for the euro."

In early Asian trading the euro rose as high as $1.1024 EUR= , its highest since Nov. 9. It also jumped to a one-year high of 124.58 yen EURJPY= against its Japanese counterpart, and a five-month high of 1.08865 Swiss franc EURCHF=R .

It last slipped 0.2 percent to $1.0975 against the dollar, and to 123.76 yen, also down 0.2 percent.

The dollar was slightly lower on the day at 112.77 yen JPY= , after jumping to a seven-week high of 113.14 yen in early trade.

The dollar index, which tracks the U.S. currency against a basket of six major rivals, added 0.1 percent to 98.737 .DXY , after dipping as low as 98.387 earlier, its lowest since November.

Net long positions on the U.S. dollar fell sharply in the latest week through May 2 to their lowest level since early October, according to calculations by Reuters and Commodity Futures Trading Commission data released on Friday, underscoring the extent to which the greenback was a casualty of the euro's strength. IMM/FX

The French election eclipsed Friday's U.S. employment data, which showed nonfarm payrolls rose by 211,000 in April. The unemployment rate fell to 4.4 percent, near a 10-year low and well below the most recent Federal Reserve median forecast for full employment. job growth in March was revised downward to 79,000 from 98,000, and the labour force participation rate dipped slightly to 62.9 percent from 63 percent. Overall, the figures did not appreciably alter market expectations that the U.S. Federal Reserve is on track to raise interest rates next month.

U.S. retail sales and core inflation data will be released on Friday this week, and they could add to evidence backing expectations of a Fed hike.

The dollar's early dip also lifted some emerging markets currencies. The Mexican peso MXN=D2 erased earlier gains and slipped to 18.9715 per dollar after rising as 18.9050.

South Africa's rand moved away from a nearly four-week low hit of 13.7075 ZAR= per dollar hit on Friday to rise as high as 13.4046. The dollar was last up 0.4 percent at 13.4634.

"We had such a severe wholesale liquidation of risk proxies in the last couple of weeks, so it looks as if the market is in consolidation phase at the moment, waiting for the next shoe to drop," said Sue Trinh, head of Asia FX strategy at Royal Bank of Canada in Hong Kong. "So those oversold currencies are finding things are looking brighter at the start of the week."

Sterling was down 0.2 percent at $1.2956 GBP= after rising as high as $1.2990 earlier in the session.

The Bank of England will hold a monetary policy meeting on Thursday. None of 62 economists polled by Reuters expects the bank rate to be adjusted from its record low of 0.25 percent, as the central bank monitors the course of Brexit negotiations with the European Union.

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