Euro gains respite from Macron's election lead

London

THE euro looked set to snap a 7-day losing streak versus the US dollar on Monday, as the single currency rallied after French leader Emmanuel Macron beat far-right challenger Marine Le Pen in the country's first round of presidential voting.

Investor concerns about the future direction of the eurozone's second-biggest economy have weighed on the euro and added to worries over the economic costs of war in Ukraine. Meanwhile, the dollar has been pushed higher by rising US yields and expectations the Federal Reserve will act quickly to stem inflation. One of the big losers has been the Japanese yen, which fell to a fresh 7-year low versus the dollar.

Macron will face Le Pen in what promises to be a tightly fought French presidential election run-off on Apr 24. Nonetheless, Macron's lead in the first round provided some respite for the euro - lifting it by as much as 0.75 per cent in Asian trading hours to US$1.0955. It was last up 0.3 per cent at US$1.09080.

Currency analysts said the contest remained on a knife-edge with negative implications for the euro.

"The narrower-than-expected victory for President Macron will keep alive fears that there is an outside chance that Le Pen can become president," said analysts at MUFG.

"The first-round results and the opinion polls pointing towards a close result in the second round will remain a modest weight on the euro in the coming weeks."

The dollar index - which tracks the greenback against a basket of 6 peers - was broadly flat on the day, just shy of the 100 mark hit last week for the first time in nearly 2 years.

As the dollar has gained ground, investors have seen little reason to exit bets against the yen while the Bank of Japan holds yields near zero.

The yen fell as much as 1 per cent on the day to 125.55 yen per dollar, its lowest level since 2015.

"There's nothing there to frighten people out of dollar/yen positions," said National Australia Bank's head of foreign exchange Ray Attrill. "So onwards and upwards for dollar/yen."

Sterling was broadly flat versus the dollar at US$1.30380. REUTERS