USD Higher on European Political Risk

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 was on track to post it best one-day gain since mid-December, 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.

In morning trade, the dollar index rose 0.6 percent to 100.53, recovering from its worst January performance since 1987. It also gained 0.6 percent against the yen to 112.39.

The dollar’s 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.

via Reuters

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Alfonso Esparza

Alfonso Esparza

Senior Currency Analyst at Market Pulse
Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He has been published by The MarketWatch, Reuters, the Wall Street Journal and The Globe and Mail, and he also appears regularly as a guest commentator on networks including Bloomberg and BNN. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
Alfonso Esparza