Written by Brigid Riley and Amanda Cooper
TOKYO/LONDON (Reuters) – The dollar steadied on Monday, while the euro traded near its lowest levels in more than a month, as political turmoil in Europe increased the level of uncertainty among traders, while investors awaited more data to gauge the euro’s strength. American economy.
Investors are weighing the risk of a budget crisis in the heart of the euro zone, where far-right and left-wing parties are gaining momentum ahead of early parliamentary elections in France, putting pressure on President Emmanuel Macron’s centrist administration.
Even after French financial markets suffered a brutal sell-off late last week, European Central Bank policymakers have no plans to discuss emergency purchases of French bonds, five sources told Reuters.
The euro settled at $1.0713 after falling to its lowest levels since May 1 at $1.06678 on Friday. It also recorded its largest weekly decline since April at 0.88% last week.
“With traders craving certainty, this may not come until after the second round of voting (July 7), so the potential for further declines in French and EU markets is real,” said Chris Weston, head of research at Pepperstone.
The index, which tracks the greenback against a basket of six other currencies, was unchanged at 105.54, near its highest levels since May 2, driven mostly by a weaker euro.
Matt Simpson, chief market analyst at City Index, said that the single European currency “represents about 57% of its weight, and the decline of the euro indirectly benefited the dollar.”
Minneapolis Federal Reserve Bank President Neel Kashkari said on Sunday that a “reasonable prediction” is that the US central bank will cut interest rates once this year and wait until December to do so.
The Federal Reserve published updated forecasts last week that showed the average expectation from all 19 US central bankers was for one interest rate cut this year.
Light week for data
This week will be light on key US economic data to help clarify the Fed’s outlook, although Tuesday’s US retail sales and Friday’s flash PMIs may give hints about consumption and economic strength.
“The data is likely to miss estimates by a large margin to revive bets on further Fed cuts, with the FOMC meeting still on investors’ minds,” City Index’s Simpson said.
The British pound fell 0.1 percent to $1.2671. Inflation pressures in Britain still appear too severe for the Bank of England to cut interest rates at its meeting on June 20, with a majority of economists polled by Reuters predicting the first cut will not take place before August 1.
Meanwhile, the yen remained held near its lowest level in 34 years against the dollar after the Bank of Japan on Friday reduced bond purchase amounts and details of its plan to scale back its monetary stimulus program at its policy meeting in July.
Governor Kazuo Ueda said he did not rule out raising interest rates in July because a weak yen is pushing import costs higher, although that may not be the hawkish statement some had envisioned, said Hiroyuki Machida, Japan’s director of foreign exchange and commodity sales. In the Australia and New Zealand Banking Group (OTC:).
He added: “The feeling was that raising interest rates and reducing their purchases are two separate things” and that the Bank of Japan would decide whether to do so or not based on different criteria.
The yen weakened slightly to trade at 157.765 after falling to 158.26 after Friday’s decision, its lowest level since April 29.
The yen’s depreciation to 160.245 yen to the dollar at the end of April triggered several rounds of Japanese official intervention totaling 9.79 trillion yen.
In cryptocurrencies, bitcoin fell 1% to $65,794, while ethereum fell 2% to $3,524, according to LSEG data.