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Election concerns in France give euro worst week in two months

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By Karen Brettell

(Reuters) -The euro was on track for its biggest weekly fall against the dollar in two months on Friday on concerns that a new government will worsen France’s fiscal situation as a snap parliamentary election approaches.

The yen hit a six-week low against the dollar, before rebounding, after the Bank of Japan (BOJ) surprised markets with a dovish monetary policy update.

French markets saw the biggest weekly jump since 2011 in the premium that investors demand to hold French government debt and bank stocks tumbled on Friday.

The concern is “the instability combined with the already existing pressure on the budget,” said Brad Bechtel, global head of FX at Jefferies in New York, adding that “any time spreads widen in Europe, the euro suffers.”

French Finance Minister Bruno Le Maire said on Friday that the euro zone’s second-biggest economy was at risk of a financial crisis if either the far right or left won because of their heavy spending plans.

Marine Le Pen’s eurosceptic National Rally (RN) is leading in opinion polls.

“On both ends of the French political spectrum, the parties that are campaigning are fiscally expansionist parties,” said Karl Schamotta, chief market strategist at Corpay in Toronto. “Markets are mostly responding to additional fiscal stress.”

The euro is on track for a 0.95% weekly fall – its biggest since April – and was last down 0.34% on the day at $1.0699. It got as low as $1.06678, the lowest since May 1.

The euro’s weakness has helped drive the dollar higher. The – which tracks the currency against six peers – was up 0.3% at 105.55 and reached 105.80, the highest since May 2.

“We’re seeing flows into the U.S. on both ends of the spectrum – from the safe-haven side as well as on the yield-seeking side – given that U.S. yields remain well above those available elsewhere,” said Schamotta.

The European Central Bank and Bank of Canada have begun cutting rates while the Federal Reserve holds steady.

The U.S. central bank adopted a more hawkish than expected tone at this week’s meeting when Fed officials projected only one rate cut this year and pushed out the start of rate cuts to perhaps as late as December.

But for now, “the Fed is sort of taking a backseat when it comes to the dollar,” Bechtel said. Elections in emerging markets and Europe are instead driving moves, he said.

A survey on Friday showed that U.S. consumer sentiment deteriorated in June as households worried about inflation and incomes.

Other data showed that U.S. import prices unexpectedly fell in May amid lower prices for energy products, providing another boost to the domestic inflation outlook.

Softer than expected consumer and producer price inflation for May this week has helped bolster hopes that inflation will continue to ease closer to the Fed’s 2% annual target and make an interest rate cut possible as soon as September.

Chicago Fed President Austan Goolsbee on Friday said he felt “relief” after the consumer inflation data, but added there needs to be more progress.

The yen fell after the BOJ’s decision to hold interest rates and restart bond buying.

In a surprise for markets, the BOJ said it would continue to buy government bonds at the current pace for now and lay out details of its tapering plan at its July policy meeting.

BOJ governor Kazuo Ueda said the central bank was “paying close attention” to the impact of the weak yen on inflation, and added that a rate hike in July was a possibility, depending on economic data.

The dollar was last up 0.17% at 157.29 , after earlier reaching 158.26, the highest since April 29.

© Reuters. FILE PHOTO: A woman holds Euro banknotes in this illustration taken May 30, 2022. REUTERS/Dado Ruvic/Illustration/File Photo

The yen’s decline to a 34-year low of 160.245 per dollar at the end of April triggered several rounds of official Japanese intervention totaling 9.79 trillion yen ($62 billion).

In cryptocurrencies, bitcoin fell 1.84% to $65,453.

Forex

Dollar steady, while yen strengthens ahead of BOJ meeting

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Investing.com – The U.S. dollar traded in a stable fashion in Europe Tuesday, while the yen soared in the wake of suspected intervention by the government last week.  

At 05:40 ET (09:40 GMT), the Dollar Index, which tracks the greenback against a basket of six other currencies, edged 0.1% higher to 104.067, bouncing from last week’s four-month low. 

Dollar takes a breather

The dollar steadied Tuesday, with traders appearing to take a breather as they digest the volatile political situation with little in the way of economic data until the release of U.S. personal consumption expenditure inflation figures for June on Friday.

Vice President Kamala Harris appears on course to be the Democratic Party’s presidential nominee, but will still need to be formally nominated.

Still, Republican nominee Donald Trump was seen polling ahead of Biden and Harris as of last week, CBS and HarrisX data showed. 

Expectations of a Trump presidency has resulted in some strength in the dollar, as analysts said he would be likely to enact protectionist trade policies. 

The main economic data release this week will arrive on Friday, with June’s index set to test market expectations that the Federal Reserve is all but certain to cut interest rates in September.

Euro lower ahead of key activity data

In Europe, fell 0.2% to 1.0873, drifting lower ahead of key activity data later in the week. 

While economic growth in the eurozone remains sluggish, strength in the dominant services sector, boosted by tourism, has kept price pressures uncomfortably high.

This has posed a challenge to the ECB, so data on Wednesday will be closely watched after the kept interest rates on hold at 3.75% last Thursday and resisted offering future guidance, saying it was “data-dependent.”

Markets are pricing in almost two ECB rate cuts for the rest of the year.

traded 0.1% lower at 1.2919, falling back from the 1.30 level that the pair saw last week for the first time in a year.

The pound has received a boost from the political stability brought about by the Labour Party’s dominant electoral victory at the start of this month.

However, at the heart of this latest leg higher in the pound is the belief that British interest rates will take longer to decline than those elsewhere.

Many big central banks have started cutting rates, with the and the U.S. Federal Reserve among the last still standing still.

Data earlier this month showed that remains stubbornly high, pushing the likely starting date of the BOE’s rate-cutting cycle from August to later in the year.

Yen strengthens ahead of BOJ meeting 

In Asia, fell 0.7% to 155.94, not far from Thursday’s five-week low of 155.375, with the yen continuing to strengthen against the dollar after suspected intervention by the government last week.

A senior member of the Japanese government called for more clarity on interest rate hikes by the Bank of Japan, the reported on Tuesday. The comments come just a week ahead of a , where some analysts expect the bank to hike interest rates by 10 basis points. 

edged higher to 7.2743, remaining close to levels last seen in November. 

The currency was battered by increasing uncertainty over the Chinese economy, especially after recent data showed it grew less than expected in the second quarter.

 

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Asia FX firms as dollar stalls amid rate cut bets, political uncertainty

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Investing.com– Most Asian currencies drifted higher on Tuesday, while the dollar retreated as the greenback’s rebound was held back by continued expectations of interest rate cuts and uncertainty over the 2024 presidential election. 

Still, sentiment towards Asia remained constrained by concerns over China, amid signs of a slowing economic recovery and uncertainty over how U.S. policies will treat the country in the coming months. 

Japanese yen outperforms, USDJPY down to 156

The Japanese yen was the best performer for the day, continuing to strengthen against the dollar after suspected intervention by the government last week.

The pair fell 0.4% to 156.41 yen, coming close to a 1-½ month low.

A senior member of the Japanese government called for more clarity on interest rate hikes by the Bank of Japan, the reported on Tuesday. The comments come just a week ahead of a , where some analysts expect the bank to hike interest rates by 10 basis points. A recent increase in countrywide inflation supported this notion, although inflation still remained relatively sluggish.

Uncertainty over the BOJ has been a key weight on the yen in recent months, as the central bank provided few cues on when it will tighten policy further. 

Dollar dips with presidential race, rate cuts in focus 

The and both fell 0.1% each in Asian trade, stalling after a sharp rebound over the past two sessions. 

The greenback turned volatile amid increased uncertainty over the U.S. presidential race, after President Joe Biden said he will not seek reelection, and endorsed Vice President Kamala Harris as the Democratic nominee. 

Reports on Monday said Harris had won enough support from Democratic delegates to become the party’s presidential nominee, but will still need to be formally nominated.

Still, Republican nominee Donald Trump was seen polling ahead of Biden and Harris as of last week, CBS and HarrisX data showed. 

Expectations of a Trump presidency had enabled some strength in the dollar, as analysts said he would be likely to enact protectionist trade policies. 

But the dollar was nursing steep losses in recent weeks amid growing conviction the Federal Reserve will cut interest rates in September. The central bank is set to at a meeting next week.

Broader Asian currencies drifted higher. The Singapore dollar’s pair fell 0.1%, while the South Korean won’s pair fell 0.3%. South Korean producer inflation picked up slightly in June, data showed. 

The Indian rupee’s pair fell slightly but remained close to record highs hit earlier in July. Focus was on the Indian government’s , set to be unveiled later in the day. 

Chinese yuan fragile amid economic uncertainty

The Chinese yuan moved little on Tuesday, seeing little relief after an unexpected interest rate cut by the People’s Bank of China. 

The pair hovered around 7.2738 yuan, remaining close to levels last seen in November. 

The currency was battered by increasing uncertainty over the Chinese economy, especially after recent data showed it grew less than expected in the second quarter.

Speculation over a Trump presidency also weighed on the yuan, given that Trump’s administration had sparked a trade war with Beijing in the late-2010s. 

Concerns over China pressured some Asian currencies. The Australian dollar’s pair fell 0.1%, pressured by the country’s large trade exposure to China.

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US dollar rises slightly after Biden ends presidential campaign

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By Gertrude Chavez-Dreyfuss

NEW YORK (Reuters) -The U.S. dollar was slightly higher on Monday in quiet trading overall, as investors digested U.S. President Joe Biden’s decision to end his re-election campaign, a scenario which could inject more volatility into the currency market.

Against the yen, however, the dollar weakened after two straight days of gains.

Market participants also looked to next week’s crucial Federal Reserve and Bank of Japan monetary policy meetings. The Fed could signal it is ready to start its easing cycle by its next meeting in September, while the BOJ, in contrast, could start to raise interest rates, giving the yen a bit of a boost.

Investors, however, remained fixated on the U.S. presidential race.

The dollar and Treasury yields fell slightly earlier on Monday, a day after Biden announced he was ending his re-election campaign, but that has since been unwound. Former President Donald Trump, the Republican nominee, sits well ahead in betting markets.

“Overall, these moves still suggest investors are, for the most part, looking to (Donald) Trump’s first term as the best available guide for what to expect from a potential second one,” wrote Jonas Goltermann, deputy chief markets economist at Capital Economics.

“In other words, higher Treasury yields, a stronger dollar, and a generally constructive environment for equities.”

Biden has endorsed Vice President Kamala Harris to replace him as the Democratic candidate in the Nov. 5 election.

Harris quickly received the backing of many within the party, but several high-profile names stayed quiet, including former U.S. President Barack Obama. Former U.S. House of Representatives Speaker Nancy Pelosi on Monday afternoon officially endorsed Harris.

The – a measure of its value relative to a basket of foreign currencies – rose 0.1% to 104.32.

Amo Sahota, executive director of currency advisory firm Klarity FX in San Francisco said of all the currency pairs, the dollar/Mexican peso had the most tangible reaction to the Biden exit. The dollar was last down 0.6% at 17.925 pesos.

“Even though the polls have narrowed only slightly and not significantly, the peso liked the news that there’s another candidate other than Biden,” Sahota said.

The U.S. election aside, analysts noted that the yen could be at a turning point against the dollar after falling since the beginning of 2024, as the Fed is close to cutting rates and the BOJ is widely expected to tighten monetary policy soon.

The U.S. central bank’s rate-setting Federal Open Market Committee (FOMC) and the BOJ will hold two-day policy meetings on July 30-31. Money markets have nearly fully priced in a Fed rate cut by September.

The greenback fell 0.3% versus the yen to 157.10., while the euro was last flat against the dollar at $1.0886.

Analysts flagged that the European Central Bank offered no concerted pushback at its policy meeting last week on the heavy pricing for a rate cut in September, which remains a strong base case.

The dollar firmed 0.1% to 7.29 yuan in offshore trading after the People’s Bank of China unexpectedly cut the seven-day reverse repo rate to 1.7% from 1.8%, saying the move would improve open market operations and support the real economy. That was followed minutes later by surprise reductions to the one- and five-year loan prime rates.

The Australian dollar, a proxy for China risks, sank 0.7% to U.S.$0.6640, giving up earlier gains following news of Biden’s withdrawal.

In cryptocurrencies, investors are bracing for the launch of exchange-traded funds tracking ether, the world’s second-largest cryptocurrency, over the next few days. Market players, however, are not expecting the massive inflows that bitcoin ETFs garnered when they first launched in January.

“The ether ETF launch is a sign of validation to the space,” said Darius Tabai, the CEO of Vertex (NASDAQ:), a decentralized exchange.

“Whether the ether ETF brings a lot of new money is unclear. itself has become this kind of isolated asset. And there’s not much spillover from bitcoin into the rest of crypto.”

Ether was last down 0.3%% at $3,496, while bitcoin rose 1.8% to $68,182.

Currency              

bid

prices at

22 July​

08:00

p.m. GMT

Descripti RIC Last U.S. Pct YTD Pct High Low

on Close Change Bid Bid

Previous

Session

Dollar 104.3 104.22 0.1% 2.89% 104.42 104.

index 18

Euro/Doll 1.0888 1.0883 0.04% -1.36% $1.0903 $1.0

ar 873

Dollar/Ye 157.08 157.48 -0.24% 11.38% 157.615 156.

n 3

Euro/Yen 1.0888​ 171.38 -0.21% 9.89% 171.65 170.

08

Dollar/Sw 0.8895 0.889 0.06% 5.69% 0.8902 0.88

iss 71

Sterling/ 1.2929 1.2911 0.15% 1.61% $1.2942 $1.0

Dollar 873​

Dollar/Ca 1.3752 1.3728 0.19% 3.75% 1.3775 1.37

nadian 06

Aussie/Do 0.6641 0.6685 -0.65% -2.59% $0.6702 $0.6

llar 632

Euro/Swis 0.9682 0.9672 0.1% 4.26% 0.9689 0.96

s 57

Euro/Ster 0.8418 0.8422 -0.05% -2.88% 0.8431 0.84

ling 14

NZ 0.5978 0.6009 -0.49% -5.37% $0.6027 0.59

Dollar/Do 72

llar

Dollar/No 10.9631​ 10.9225 0.37% 8.17% 11.0062 10.8

rway 781

Euro/Norw 11.9341 11.8737 0.51% 6.33% 11.9695 11.8

ay 58

Dollar/Sw 10.7209 10.6789 0.39% 6.5% 10.7383 10.6

eden 279

© Reuters. FILE PHOTO: U.S. Dollar banknotes are seen in this illustration taken July 17, 2022. REUTERS/Dado Ruvic/Illustration/File Photo

Euro/Swed 11.6732 11.6129 0.52% 4.92% 11.6834 11.6

en 001

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