Euro drops on coronavirus lockdown report for France

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TOKYO (Reuters) – The euro fell against the dollar on Wednesday after a media report that the French government is leaning towards reinstating a nationwide lockdown to curb the resurgence of coronavirus infections.

FILE PHOTO: US dollar and euro banknotes can be seen in this illustrative photo from June 22, 2017. REUTERS / Thomas White / Illustration

The dollar has strengthened slightly against other major currencies, but sentiment for the greenback is turning bearish amid uncertainty over the outcome of the US presidential election next week.

Traders are bracing for more volatile trading in currency markets as the coronavirus again spreads rapidly in Europe, Britain and the United States, threatening economic growth. Concern over the US election is another major risk that will keep currencies leading the way.

“The coronavirus spike is definitely a concern for France and southern Europe, so the euro’s rise is heavy,” said Junichi Ishikawa, senior currency strategist at IG Securities in Tokyo.

“I don’t expect the dollar to gain much against elsewhere, because people have been too complacent about the reaction of the markets after the US election.”

The euro fell 0.15% to $ 1.1780 in Asia on Wednesday, falling for a third consecutive trading session.

The British pound fell 0.11% to $ 1.3030, but should be supported by hopes of a last minute trade deal between Britain and the European Union.

The dollar stabilized at 104.50 yen after falling 0.4% on Tuesday that brought it near a one-month low.

French President Emmanuel Macron will deliver a televised speech on Wednesday evening.

His office did not say what it was, but French media reported on Tuesday that the government was considering implementing a nationwide lockdown from midnight Thursday.

A second wave of coronavirus infections in many countries ahead of winter in the northern hemisphere has fueled fears that economic growth will weaken again.

Traders say the focus is more on the United States, which also struggles to contain the coronavirus as people vote early ahead of the November 3 election.

National polls show Democratic rival Joe Biden has a lead over incumbent Republican President Donald Trump, but some investors are skeptical as polls did not predict Trump’s election four years ago.

Legal battles between Republicans and Democrats over how to count votes have increased the risk of the election result being challenged, which is a negative factor for the dollar, some analysts say.

Sentiment for the greenback also weakened after Trump admitted that a new round of U.S. fiscal stimulus was unlikely ahead of the election.

The Australian dollar remained lower after data showed third quarter consumer prices were up 1.6% from the previous quarter, slightly more than the median estimate.

The Reserve Bank of Australia is expected to lower interest rates and increase its purchases of public debt at its next meeting on November 3.

Reporting by Stanley White; edited by Richard Pullin

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