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Euro tumbles from 6-month peak as Macron win in France spurs profit-taking

Tuesday, May 9, 2017 - 06:14

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Mr Macron's overwhelming win on Sunday briefly pushed the euro above US$1.10 against the greenback, the highest since the US presidential election in November.

[NEW YORK] The euro fell from six-month highs against the US dollar on Monday after Emmanuel Macron's victory in France's presidential election, as investors took profit on a roughly 3 per cent gain for the currency since he won the first round two weeks ago.

Mr Macron's overwhelming win on Sunday briefly pushed the euro above US$1.10 against the greenback, the highest since the US presidential election in November.

"A Macron win is largely priced into the euro," said Shaun Osborne, chief FX strategist at Scotiabank in Toronto.

"Heavy trading in the spot market so far today suggests a modest unwind of the April and May rally is coming, at least."

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The safe-haven yen and Swiss franc, meanwhile, fell on Monday as risk appetite improved with Mr Macron's victory.

The French centrist's defeat of nationalist Marine Le Pen spelled relief for investors who had feared another populist upheaval after Britain's vote to exit the European Union and Donald Trump's shock election as US president.

The euro rose as high as US$1.1023, a six-month peak. It also jumped to a one-year high of 124.58 yen.

But by late trading in New York, the euro fell 0.6 per cent to US$1.0932 against the US dollar, and 0.4 per cent against the yen to 123.56 yen.

Removal of the political risk investors had associated with Ms Le Pen - who had promised to take France out of the euro - prompted investors to refocus on economic fundamentals and the pace of monetary policy normalisation in Europe and the United States.

Short positions on the euro also reached their lowest level since early May 2014 in the week up to last Tuesday, suggesting increased optimism for the currency, data showed on Friday.

But some analysts said that despite improving prospects in the euro zone, threats to the euro have not faded.

"Macron and his new En Marche! movement will need to gain considerable support within the French government in order to further his pro-euro agenda," said James Chen, head of research at Forex.com in Bedminster, New Jersey.

This would not be an easy task as Ms Le Pen promised to continue her cause under a newly transformed far-right party that would run in next month's pivotal parliamentary elections, Mr Chen added.

The US dollar index, which tracks the US currency against six rivals, added 0.4 per cent to 99.067.

The greenback also rose to a three-week high against the Swiss franc and was last up 1.1 per cent at 0.9983 franc. It gained 0.2 per cent against the yen to 113.06.

REUTERS

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