Bridget Riley
TOKYO, April 28 (Reuters) – The dollar held firm on Thursday while the euro hovered near its lowest level in more than a month amid continuing concerns over the political outlook in Europe.
The yuan hovered near its lowest levels in months after China released a slew of economic data suggesting an uneven recovery in the world’s second-largest economy.
The euro was little changed at $1.0701, recovering somewhat after dropping to $1.06678 on Friday, its lowest since May 1. The euro last week suffered its biggest weekly drop since April of 0.88 percent.
Investors are worried about the risk of a fiscal crisis at the heart of the euro zone as far-right and left-wing parties gain strength in France ahead of surprise parliamentary elections, putting pressure on President Emmanuel Macron’s centrist government.
European Central Bank (ECB) policymakers are not planning to discuss emergency purchases of French government bonds after French financial markets endured intense selling pressure at the weekend, five sources told Reuters.
While the political turmoil is bearish for the euro, “the euro makes up about 57% of the total, so the euro’s decline indirectly benefits the dollar,” said Matt Simpson, senior market analyst at City Index.
The dollar/yen, which measures the greenback’s relative value against a basket of major currencies, was little changed at 105.52 after hitting its highest since May 2 at 105.80 on Friday.
Minneapolis Federal Reserve President Neel Kashkari said Sunday it’s a “reasonable expectation” that the Fed will cut interest rates once this year and then wait until December.
The Federal Reserve released its latest forecasts last week, which showed that the average forecast of all 19 U.S. central bank governors was for one interest rate cut this year.
There is little major U.S. economic data this week to help clarify the Fed’s outlook, but U.S. retail sales on Tuesday and flash PMI figures on Friday could give hints about the strength of consumption and the economy.
“With the FOMC meeting still fresh in investors’ minds, the data would likely have to come in much worse than expected to reignite speculation of further Fed rate cuts,” City Index’s Simpson said.
The pound was flat at $1.2682. Britain’s inflationary pressures remain too high for the Bank of England to cut interest rates when it meets on June 20. A Reuters poll published last week found 63 of 65 economists expect the first rate cut not to come until Aug. 1.
Meanwhile, the yuan was little changed at 7.2550 to the dollar as domestic data showed a mixed picture in China’s economic situation.
Offshore traded around 7.2683.
New home prices fell at the fastest pace in 9-1/2 years in May as the real estate industry struggled to find a bottom, and industrial production in May fell less than expected.
Retail sales beat expectations.
The People’s Bank of China kept its key policy rate unchanged on Monday as expected, as a weak yuan continues to hinder policy easing.
The yen hovered near a 34-year low against the dollar after the Bank of Japan on Friday detailed plans to reduce and taper bond purchases at its July monetary policy meeting.
However, Governor Kazuo Ueda said he would not rule out the possibility of raising interest rates in July as the weak yen has pushed up import costs.
The yen fell to as low as 158.26 yen after Friday’s decision, its lowest since April 29, before trading down 0.06% against the dollar at 157.48 yen.
After the yen fell to 160.245 to the dollar at the end of April, Japan carried out multiple official interventions totaling 9.79 trillion yen.
In cryptocurrencies, Bitcoin last rose 1.62% to $66,794.00.
