Abu Dhabi, UAEMonday 17 June 2019

Euro holds firm as pro-European parties limit gains of nationalists

The British pound rises 0.15% to $1.2731, regaining some lost ground

European bloc common currency holds firm after EU parliamentary elections. EPA
European bloc common currency holds firm after EU parliamentary elections. EPA

The euro held firm in early Monday trade after pro-European Union parties withstood more fragmentation than before to hold on to two-thirds of seats in the EU Parliament elections, limiting gains in nationalist opponents.

The common currency traded at $1.1211 in Asian trade, near its highest levels in a week-and-a-half, and off a two-year low of $1.11055 touched on Thursday.

While center-right and center-left blocs are losing their shared majority, surges in the Greens and liberals meant parties committed to strengthening the union held on to two-thirds of seats, official projections showed.

The results dented the hopes of anti-immigration, anti-Brussels National Rally led by Marine Le Pen, Italian Deputy Prime Minister Matteo Salvini and others who have been opposing attempts to forge closer EU integration.

"It looks like pro-EU parties still have a majority. To be sure, we see a rise of anti-EU parties in some countries but it is not like they are winning an outright majority," said Minori Uchida, chief currency analyst at MUFG Bank.

"I'd expect markets' focus to shift back to US-China relations," he said.

Trading was subdued on Monday due to market holidays in London and New York, limiting moves in other currency pairs.

The US currency traded at ¥109.45, up 0.15 per cent, underpinned by Japanese players' bargain-hunting.

Buying interest from Japanese investors is strong when the dollar dips near ¥109, said Mitsuo Imaizumi, chief currency strategist at Daiwa Securities.

"Data shows Japanese investors bought a large amount of foreign bonds a few weeks ago when the dollar fell near ¥109. There's demand from Japanese companies that need dollar for their M&A deals," he said.

Still, the US currency is not far from a three-month low of 109.02 touched two weeks ago, hit amid worries about escalating tensions between Washington and Beijing over trade and technology.

The dollar has been also capped against the yen as US President Donald Trump is seen putting pressure on Japan to take measures to reduce its trade surplus with the US.

Mr Trump, who arrived in Tokyo on Saturday, tweeted on Sunday that much of the trade negotiation with Japan will wait until after the country's election in July.

The British pound ticked up 0.15 per cent to $1.2731, having regained some ground after Prime Minister Theresa May set out a departure date, bouncing back from a four-and-a-half-month low of $1.2605 set on Thursday.

But the prospect of a "no deal" Brexit was fast becoming the central battle of the race among contenders to succeed Mrs May, with four of eight leadership hopefuls having said Britain must leave the EU on October 31 even if this means a no-deal Brexit.

Updated: May 27, 2019 11:23 AM

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