The euro was 0.3 percent from a seven-month high against the dollar after Angela Merkel won an overwhelming endorsement from German voters, putting her on course for the biggest election tally since Helmut Kohl’s post-reunification victory of 1990.
Gains in Europe’s common currency were capped as the chancellor must now find a coalition partner after her preferred allies, the Free Democrats, looked poised to crash out of the lower house of parliament. The dollar gained against New Zealand’s currency with Federal Open Market Committee voting member William C. Dudley scheduled to speak today as markets assess when the central bank will reduce the pace of its bond-purchase program.
“This is a vote in favor of Merkel rather than a vote in favor of big changes,” said Steven Englander, Citigroup Inc.’s global head of G-10 currency strategy in New York. “It’s most likely Merkel will govern in a grand coalition with the Social Democrats, so that’s a slight euro positive because the government would be somewhat more friendly to the peripheral nations in the currency bloc.”
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