×

Dollar rises on political uncertainty in Europe, technical buying

Tomohiro Ohsumi | Getty Images

The dollar climbed to a more than one-week high on Tuesday as it gained for a fifth straight session, bolstered by technical buying after recent losses as well as political uncertainty in Europe with a slew of elections this year.

The greenback posted its best one-day gain since mid-January, rising at the expense of the euro, which has struggled on renewed worries about Greece's debt problems and 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 and from buying by bargain hunters, looking to pick up the greenback 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.

"People are now looking at the periphery and some of the core (bond) spreads in Europe," said Mark McCormick, North American head of FX strategy at TD Securities in Toronto. "You are starting to see some tension in the European credit market."

In afternoon trade, the dollar index was up 0.4 percent to 100.27, recovering from its worst January performance since 1987. It also gained 0.5 percent against the yen to 112.27.

The dollar gains accelerated after China reported its foreign exchange reserves unexpectedly fell below the $3 trillion level in January for the first time in nearly six years.

The euro, meanwhile, fell 0.58 percent to $1.0688, posting its worst daily performance in about two weeks.

France's tightly contested presidential race sank deeper into smear and sleaze after centrist Emmanuel Macron was forced to deny an extramarital affair and as scandal continued to dog conservative Francois Fillon and his party.

In the United States, widespread predictions late last year that the dollar would gain in early 2017 have been upset by a combination of worries about President Donald 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 in London.