TOKYO (Reuters) – The euro fell against the dollar on Wednesday following a media report that France’s government was leaning toward reinstating a national lockdown to curb a resurgence in coronavirus cases.
The dollar, however, gave up early gains against other major currencies as sentiment turned bearish due to uncertainty about the outcome of the U.S. presidential election next week.
The spike in infections “is certainly a concern for France and southern Europe, so the euro’s upside is heavy”, said Junichi Ishikawa, senior foreign exchange strategist at IG Securities in Tokyo.
He added that he does not expect the dollar to gain much against other currencies, “because people have been overly complacent about how markets will react after the U.S. election”.
The euro EUR=EBS fell 0.14% to $1.1780 in Asia on Wednesday, down for a third consecutive session.
Sterling GBP=D3 held steady at $1.3035, supported by hopes for a last-minute trade deal between Britain and the European Union.
The dollar was little changed at 104.46 yen JPY=D3 after a 0.4% decline on Tuesday brought it close to a one-month low.
Traders are bracing for more volatility in currency markets as the virus spreads in Europe, Britain, and the United States, fanning concerns that economic growth will weaken once again.
French President Emmanuel Macron will give a televised address on Wednesday evening.
His office has not said what the speech is about, but local media has reported that the government is exploring imposing a lockdown from midnight on Thursday.
FOCUS ON U.S. ELECTIONS
Traders, however, say the bigger focus is on the United States, which is also struggling to contain the coronavirus as people vote early before elections on Nov. 3.
Domestic polls show Democrat rival Joe Biden has a lead over Republican incumbent President Donald Trump, but some investors are sceptical because the polls did not predict Trump’s victory four years ago.
Legal battles between Republicans and Democrats over how to count votes have raised the risk that the outcome of the election will be disputed, which is a negative factor for the dollar, some analysts say.
Sentiment for the greenback has also weakened after Trump conceded that an additional round of U.S. fiscal stimulus is unlikely before the election.
The onshore yuan CNY=CFXS fell to 6.7140 against the dollar, extending a pullback from a 27-month high hit last week as the People’s Bank of China takes steps to curb the currency’s appreciation.
The Australian dollar AUD=D3 trimmed losses after data showed consumer prices in the third quarter rose 1.6% from the prior quarter, which was slightly more than the median estimate.
The Reserve Bank of Australia is widely expected to lower interest rates and expand its government debt purchases at its next meeting on Nov. 3.
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