Rising Dollar After Elections Uncertainty in Europe
The dollar rose to a more than one-week high on Tuesday. It gained for a 5th straight session, boosted by technical buying after recent losses. Also, political uncertainty in Europe with a bunch of elections this year.
The Dollar was on track to post it best daily gain since December, rising at the expense of the euro. The euro is struggling on renewed worries about Greece’s debt issues. Furthermore, there are signs that far-right candidate Marine Le Pen is gaining momentum before France’s presidential election.
“The dollar is benefiting from mounting political uncertainty ahead of a number of crucial elections in the euro zone.
Its also benefiting from buying by bargain-hunters. They’re looking to pick up the currency following its worst start to the year in 30 years”.
Said Omer Esiner, chief market analyst at Commonwealth Foreign Exchange in Washington. Elections in the Netherlands, Germany and possibly Italy, more wrangling over Greece’s bailout and an upcoming reduction in the European Central Bank’s monthly bond-buying are all playing on investor nerves, analysts said.
In morning market, the dollar index rose 0.6 percent to 100.53 (DXY), recovering from its worst January performance since 1987. It also gained 0.6 percent against the yen to 112.39<jpy=>.
The dollar’s gains accelerated after China reported its foreign exchange reserves unexpectedly fell below the $3 trillion level in January in six years.
The euro, meanwhile, fell 0.7 percent to $1.0677 <eur=>, on pace for its worst daily performance in about three weeks.
Widespread predictions last year that the U.S. currency would gain in early 2017 have been upset by a combination of worries about Trump’s protectionist bent and the global implications of his approach to geopolitics,
“Until we have answers to some of the big (policy) questions I can’t see any free space for dollar bulls to run into. They are fearful of what the administration is prepared to do to actually keep a lid on the dollar,” said Neil Mellor, senior currency strategist with Bank of New York Mellon (NYSE:BK) in London.