By Rae Wee
SINGAPORE (Reuters) – The euro rose on Monday after the first round of France’s snap election put the far-right in first place, albeit by a smaller margin than projected, while the yen struggled to break a near 38-year low.
Marine Le Pen’s far-right National Rally (RN) party won the first round of France’s parliamentary election on Sunday, exit polls showed, although analysts noted the party won a smaller share of the vote than some surveys had initially projected.
The euro, which has fallen about 0.8% since President Emmanuel Macron called an election on June 9, rose 0.4% to $1.0756, after hitting a two-week high earlier in the session.
“They (RN) have actually performed a little worse than expected,” said Carol Kong, currency strategist at Commonwealth Bank of Australia (OTC:).
“As a result of that, we saw the euro rise modestly in early Asian trading simply because we might actually have fewer fears of more expansionary and unsustainable fiscal policy if the far-right party performed a little worse.”
The euro’s rise pushed the dollar down slightly against a basket of currencies, though the greenback also faltered after data on Friday showed U.S. inflation cooled in May, cementing expectations the Federal Reserve will begin cutting interest rates later this year.
Market prices are now pointing to about a 63% chance of a Federal Reserve cut in September, compared to a 55% chance a month ago, according to the CME FedWatch tool.
Against the dollar, the pound sterling
The New Zealand dollar rose 0.12% to $0.6098. It was last down 0.11% at 105.61, having previously hit a one-week low.
“If inflation continues to behave as expected and upcoming data is in line with FOMC forecasts over the summer, the first 25 basis point cut will still be possible as early as September,” said Michael Brown, senior research strategist at Pepperstone.
UNDER PRESSURE
The yen struggled to gain ground against a broadly weaker dollar and was last down 0.1% at 161.03 per dollar, just one step away from a 37-and-a-half-year low of 161.27 hit on Friday.
The Japanese currency had reversed its early gains in the session following revised data showing its economy contracted more than initially reported in the first quarter.
Separate data on Monday also showed the business environment in Japan’s services sector soured in June as the yen’s fall pushed up costs, offsetting a big rise in factory confidence and pointing to weaker consumption.
The yen has already fallen more than 12% this year as it continues to be hit by stark interest rate differentials between the United States and Japan, and its latest decline to the weaker side of 160 per dollar keeps investors on high alert. against any intervention by the Japanese authorities to shore up the currency.
Elsewhere in Asia, the Chinese yuan – also a victim of stark interest rate differentials with the US – fell a marginal 0.04% to 7.3204 per dollar in the offshore market.
The last one stood at 7.2679 per dollar.
The Chinese currency gained some support from a private sector survey that showed factory activity among smaller Chinese manufacturers grew at the fastest pace since 2021 thanks to orders from abroad.
This came after official data over the weekend revealed that China’s manufacturing activity fell for a second month in June, while services activity fell to a five-month low.
“June PMIs were mixed, but overall suggest the recovery lost some momentum last month,” economists at Capital Economics said.
“We believe economic activity will continue to hold up relatively well in the coming months. While the latest housing stimulus has done little to boost new home sales, fiscal stimulus and strong exports should continue to support growth, at least in the short term. term”.