By William L. Watts, MarketWatch
FRANKFURT (MarketWatch)—The euro tumbled to its lowest level versus the dollar since February and remained under pressure Monday as European voters rejected austerity measures in weekend elections.
The shared currency EURUSD +0.01% changed hands at $1.3010 versus the dollar in recent action, down from $1.3095 in North American trade late Friday after trading as low as $1.2960, according to FactSet Research data.
Elections on Sunday saw Socialist challenger François Hollande defeat French President Nicolas Sarkozy in a widely anticipated result. Voters in Greece’s parliamentary elections, meanwhile, punished the country’s pro-bailout parties, denying them a majority in parliament.
At last count more than 60% of Greece’s popular vote went to small parties on the left and right, The Wall Street Journal reported. Those parties campaigned against the additional austerity measures demanded by the country’s international lenders in return for a second bailout approved earlier this year.
“Risk assets started the week as they finished last week—poorly,” said Sue Trinh, global currency strategist at RBC Capital Markets in Hong Kong, in a note.
“Risk assets were offered following the early results of Sunday’s elections in Europe, where the Greek results (or lack thereof) hit risk appetite hard.”
Germany
Meanwhile, uncertainty also surrounds Hollande’s relationship with German Chancellor Angela Merkel. Hollande campaigned against German-led calls for austerity across the euro zone, arguing that Europe must also move to incorporate growth-oriented policies.
Merkel, meanwhile, saw her ruling coalition set back in a state election Sunday. News reports said results showed Merkel’s center-right coalition lost its majority in the state, although the final outcome remained too close to call, with the left-leaning Social Democrats and Greens also falling short of majorities.
Asian equities tumbled and European stock indexes began the day with heavy trading losses. U.S. stock index futures also posted heavy losses.
The dollar was boosted as investors sought safety. The ICE dollar index DXY +0.32% , which measures the U.S. unit against a basket of six major rivals, rose to 79.800 from 79.468 late Friday.
‘Ordered off the bridge’
Michael Derks, chief strategist at FxPro, said markets fear a growing anti-austerity backlash could turn into an anti-German vendetta.
“Policy-making in Europe throughout this crisis has always been incredibly fractious but at least it had a chance of a sensible outcome with Germany at the controls. If the German captain is ordered off the bridge of the ship, then it is little wonder that markets fear Europe will rapidly run aground,” he said in emailed comments.
Trinh said Monday’s bank holiday in Britain could make for exaggerated moves due to thin trading conditions.
The safe-haven Japanese yen also rallied. The dollar USDJPY -0.09% slipped to ¥79.83 from ¥79.88.
The British pound GBPUSD +0.10% fell to $1.6138 from $1.6150.
The Australian dollar AUDUSD +0.27% changed hands at $1.0171, down from $1.0187.
The Aussie found support after retail-sales data for March surprised to the upside, said Boris Schlossberg, director of currency research at GFT.
“The news helped to ease investor concern over another possible rate cut by the [Reserve Bank of Australia] in June after the central bank surprised the market with a 50-basis-point cut last week,” Schlossberg said. He noted that positive data were offset by weaker labor-market news amid a decline in ANZ job ads.
William L. Watts is MarketWatch's European bureau chief, based in Frankfurt.
