Yen falls on France
relief; loonie lumbered with U.S. tariff
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[April 25, 2017]
By Jemima Kelly
(Reuters) - The dollar climbed as much as 0.7 percent against the yen on
Tuesday, as investors regained some risk appetite after the first round
of the French presidential election delivered the result they had hoped
for and that pollsters had forecast.
The Canadian dollar - or "loonie", as it is known by traders - skidded
to four-month lows after the United States imposed duties on Canadian
Centrist candidate Emmaneul Macron won the first round of Sunday's
election in France, sending the euro surging above $1.09 as investors
took heart from opinion polls showing Macron would beat far-right rival
Marine Le Pen - who threatens to pull France out of the euro zone - in
the run-off on May 7.
The single currency stayed close to a 5 1/2-month high of $1.0940 hit
the previous day, up 0.2 percent on the day by 1140 GMT at $1.0884,
having finished Monday around 1.4 percent higher, its biggest one-day
climb since June.
The safe-haven yen, meanwhile, which investors tend to flock to at times
of risk aversion, fell around 0.7 percent to 110.55 yen to the dollar <JPY=>.
"(Markets are) risk-on – the French presidential election was an obvious
risk, and it now looks like, barring a shock, Macron will gallop ahead
and the market will have its candidate in place, and that’s another
hurdle overcome this year," said BNY Mellon currency strategist Neil
Mellor, in London.
The first-round outcome spared investors their worst-case scenario of Le
Pen facing off against far-left eurosceptic Jean-Luc Melenchon, who had
surged in the polls in recent weeks, though he never broke into the top
That the pollsters - who had been criticized for failing to predict last
year's votes for Brexit and Donald Trump - had accurately predicted
Sunday's result bolstered confidence in their projection that Macron
would win the second round, by a margin of 20 percentage points or more.
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U.S. dollar and Euro notes are seen in this November 7, 2016 picture
illustration. Picture taken November 7. REUTERS/Dado Ruvic/Illustration
This increased confidence meant that political risk was being priced out
of the euro ahead of the second round, with implied volatility - an
option used to hedge against big future price swings - having fallen
"This (second round) is going to be a non-event for the market," said
Commerzbank currency strategist Thu Lan Nguyen.
"Markets have pretty much priced out the risk of a Le Pen victory, and
rightly so, because the first round of the elections has shown that the
polls in France were correct ... and this increases the confidence in
the polls for the second round ... It's highly likely that (Macron) is
going to win."
Nguyen added that focus on the euro would now increasingly turn to
monetary policy. The European Central Bank meets on Thursday, though it
is not expected to announce that it is winding down - or "tapering" -
its asset-purchase program until later in the year, which should lift
Despite gains against most major currencies, the U.S. dollar index,
which is heavily exposed to the euro, slipped 0.1 percent to 99.035 <.DXY>.
(Reporting by Jemima Kelly; Editing by Larry King)
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