NEW YORK—The euro edged higher after the party of Spain's prime minister hung on to power in his home region, while the Japanese yen weakened after data showed a widening trade gap.
Local election results in Spain showed Mariano Rajoy's center-right Popular Party retaining control of the regional parliament in Galicia, a vote that had been seen as an important test. As expected, the Basque nationalist party was on track for victory in a Sunday election in the Basque Country.
"The home win was important for Rajoy as it was seen as a mini-referendum on the austerity his government has been forced to introduce. In fact, the Popular Party extended its majority here by three seats," said Steven Barrow, currency and fixed-income strategist at Standard Bank in London.
In midmorning trade, the euro was at $1.3076 compared with $1.3023 late Friday. The dollar was at ¥79.86 compared with ¥79.32, while the euro was at ¥104.42 compared with ¥103.26. The pound traded at $1.6032 from $1.6004, while the dollar bought 0.9250 Swiss franc from 0.9284 franc.
The Wall Street Journal Dollar Index, which tracks the dollar against a basket of currencies, was at 69.70 compared with 69.757 late Friday.
The ICE dollar index, which measures the U.S. unit against a basket of six major rivals, slipped to 79.48 from 79.629 late Friday.
Strategists at UniCredit Bank UCG.MI +1.67% in Milan said investor frustration over Spain's refusal to seek a bailout from the euro-zone rescue fund, which would allow the European Central Bank to implement its aggressive bond-buying program, and worries over Greece will likely remain. The Galician election results, however, will likely keep a euro selloff at bay, leaving room for the shared currency to continue seesawing around the $1.3050 level.
The yen saw added pressure after data showed exports dropped by 10.3% in September compared with the year-earlier month, exceeding expectations for a 10% drop. Imports rose 4.1%, widening the trade gap to ¥558.6 billion ($7.04 billion) versus a consensus forecast of ¥547.9 billion.
The 80-yen level marks an important psychological target for the dollar, strategists said. From a technical perspective, bulls were encouraged last week as the dollar/yen pair broke out to the upside and cleared horizontal resistance at the 79-yen level, said Matthew Weller, analyst at GFT, in a research note.
The poor trade data raised expectations that the Japanese central bank would further ease monetary policy when it meets next week, in keeping with other major global central banks.
"With Economy Minister [Seiji] Maehara accusing the Bank of Japan of falling behind, the scene is set for the central bank to ease dramatically next week," said Tom Levinson, currency strategist at ING in London.
