Published: Wed, May 31, 2017
Money | By Armando Alvarado

Dollar, yen inch higher as European political nerves weigh

Dollar, yen inch higher as European political nerves weigh

A new round of political worries over Greece, Italy and Britain had European currencies on the retreat against the dollar on Tuesday, the resulting bleaker mood on stock markets also pushing the yen broadly higher.

Sterling, hammered by a slump for Prime Minister Theresa May's Conservatives in opinion polls last week, recovered after weekend polls confirmed the trend but showed her still on course to win next week's vote.

Italian banking shares, hit in the past two sessions by worries over early elections, were among the losers again on Tuesday with UniCredit down 0.9 percent.

Other major markets were also deeply in the red, with French shares sinking nearly 1 percent, prodding investors towards the traditional security of the yen, which gained around 0.3 percent against the dollar and 0.4 percent against the euro.

Market players are watching to see if German Chancellor Angela Merkel holds her power, while also looking towards Italy to gauge the rise of populist movements.

As German media reported that Greece could be at risk of defaulting on its next bailout repayment in July the appeal of the single currency weakened markedly, despite Greek officials rapidly rejecting the claims. Among other euro zone bank heavyweights, Deutsche Bank fell 1.6 percent and Spain's Caixabank dropped 1.4 percent. Germany's inflation is expected to have fallen from 2.0% to 1.6% this month.

The dollar edged down 0.1 per cent against its Japanese counterpart to ¥111.17 (RM4.27), but remained solidly mired in its recent narrow range between last week's high of ¥112.13 and May 18's low of ¥110.24.

The region's banks also came under pressure as Deutsche Bank cut the sector to "underweight", while sterling GBP= rebounded having been knocked recently by signs that next week's United Kingdom election is set to be closer than originally expected.

Markets are awaiting economic indicators including French first quarter gross domestic product, German inflation data for May, and USA inflation for April later in the session.

EURUSDMay30day
Dollar, yen inch higher as European political nerves weigh

London Stock Exchange Group (LON:LSE) agreed Tuesday to buy The Yield Book, Citigroup 's (NYSE:C) fixed-income analytics and indexing business, for $685 million in cash.

The euro came under pressure following comments from the head of the European Central Bank suggesting it will stick to its loose monetary policy for now, disappointing those who had hoped for some form of tightening at its June meeting.

Energy stocks traded mixed, as French oil and gas major Total SA (PA:TOTF) dropped 0.07%, Italy's ENI (MI:ENI) rose 0.49%, while Norwegian rival Statoil (OL:STL) was unchanged.

MILAN, May 30 European shares fell slightly on Tuesday, with banks leading the decline on fresh political jitters and following a downgrade by a top global broker.

Meanwhile in London the FTSE 100 was off 0.3 percent as next week's general election approaches.

Shares in Glencore (LON:GLEN) rose 0.70%, Anglo American (LON:AAL) gained 0.43% and BHP Billiton (LON:BLT) advanced 0.12%.

In the USA, futures pointed to a flat open.

The Dow Jones Industrial Average fell 36.26 points, or 0.17 per cent, to 21,044.02.

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Trump criticises Germany after Merkel questioned U.S. reliability
German Foreign Minister Sigmar Gabriel was blunter on Monday, slamming the USA president's "short-sighted" policies that have "weakened the West" and hurt European interests.

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