Dollar, Euro Up as Macron Lead Boosts European Currency

By Gina Lee – The dollar was up on Monday morning in Asia, with the euro starting the week off strong as incumbent Emmanuel Macron led in the first round of voting in the French presidential election. Other moves were small as investors await central bank policy decisions in Europe, Canada, New Zealand, and South Korea.

The U.S. Dollar Index that tracks the greenback against a basket of other currencies edged up 0.13% to 99.882 by 11:27 PM ET (3:27 AM GMT).

The USD/JPY pair was up 0.45% to 124.88.

The AUD/USD pair edged down 0.18% to 0.7441 and the NZD/USD pair was down 0.22% to 0.6829.

The USD/CNY pair inched up 0.10% to 6.3717. Chinese data released earlier in the day showed that the consumer price index grew 0% month-on-month and 1.5% year-on-year in March. The producer price index grew 8.3%.

The GBP/USD pair edged down 0.11% to 1.3016.

The euro briefly climbed as high as $1.0955 amid thin trading at the Asian session open, before settling about 0.15% higher than Friday’s close at $1.0890. The single currency also gained against the pound and the yen.

With 88% of votes counted, Macron garnered 27.41% and his far-right challenger Marine Le Pen was next with 24.9%, with the pair next contesting a runoff vote on Apr. 24. Macron’s strong start gave some confidence to markets that are wary about Le Pen’s protectionism, even as she no longer backs discontinuing the euro.

However, gains were capped as investors await the European Central Bank (ECB)’s policy decision, due on Thursday.

“It’s a patchy bit of support,” Westpac strategist Imre Speizer told Reuters, with investors also grappling with an ECB unlikely to sound as aggressive as Federal Reserve in heading off inflation.

“I think that the biggest story of the two central banks being quite different is probably quite supportive of the dollar in the longer run,” he added.

The dollar index topped the 100-mark for the first time in nearly two years on Friday but fell back down during the Asian session.

The ECB has been in the unenviable position of balancing rising inflation against the pressure on economic growth from the war in Ukraine as it prepares to hand down its policy decision on Thursday. Although the central bank is widely expected to provide more details about a winddown in asset purchases, it may not give any further explicitly hawkish signals.

The Bank of Canada and the Reserve Bank of New Zealand will hand down their policy decisions on Wednesday. Interest rate swaps pricing indicates a more than 90% chance that both central banks hike interest rates by 50 basis points. However, this leaves the Canadian and New Zealand dollars vulnerable should the hikes be smaller.

The New Zealand dollar wobbled downward on Monday, while the Canadian dollar held steady at C$1.2583 against its U.S. counterpart.

The Bank of Korea will also hand down its policy decision on Thursday.

Meanwhile, the Australian dollar also eased, with gains in commodity currencies beginning a further retreat as export prices fall.

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