* Dollar takes back lost ground vs perceived safe-haven yen
* Euro under pressure as investors trim long positions
By Hideyuki Sano
TOKYO, May 31 The British pound dropped on
Wednesday after a new poll found that British Prime Minister
Theresa May's Conservative Party risks falling short of an
overall majority in the June 8 national election.
The pound was down 0.3 percent at $1.2816 after
falling as low as $1.2791 earlier, approaching a one-month low
of $1.2775 touched on Friday. It also slipped to a low of 0.8738
pound per euro, near Friday's eight-week low of
New constituency-by-constituency modelling by YouGov showed
the Conservative Party might lose 20 of the 330 seats it holds
while the opposition Labour Party could gain nearly 30 seats,
The Times said.
The news came after a string of opinion polls show a
narrowing lead for May's Conservatives, shaking the confidence
among investors that she would easily win a majority in the
"The narrowing in the polls has clearly dented sterling's
performance and continues to weigh on the currency, and is
probably likely to do so in the near term," said Mitul Kotecha,
head of Asia macro strategy for Barclays in Singapore.
The dollar touched a 12-day low against the safe-haven yen
overnight as investors turned cautious amid political
worries in Europe as well as weaker stock and commodity markets
after a long U.S. holiday weekend, but then it recouped its
The greenback, which fell to 110.665 yen on Tuesday, last
traded up 0.2 percent at 111.05 yen. It continued to remain
caged in a relatively narrow range between last week's high of
112.13 and a low of 110.24 on May 18.
Investors continued to fret that investigations into
President Donald Trump's ties with Russia could hamper his
administration's progress on tax cuts and other promised
stimulus measures, concerns which has been undermining the
dollar in recent weeks.
The dollar index edged up 0.1 percent to
97.420, holding well above last week's 6-1/2-month low of
The euro inched 0.1 percent lower to $1.1175,
pressured by fears of an early election in Italy and a
softer-than-expected inflation reading in Germany. The latter
sent German government bond yields to their lowest level in more
than a month.
Italy's 5-Star Movement voted over the weekend in favour of
a proportional electoral system, raising the chances of an
unprecedented autumn parliamentary election.
Investors continued to await clues from the European Central
Bank that it would wind down its bond purchase programme this
autumn as planned in light of indications that the eurozone
economy is improving. But ECB President Mario Draghi on Monday
repeated the need for "substantial" stimulus.
"The main scenario is that the ECB will eventually taper its
stimulus, although Draghi has given no hints about this as of
now, and that is weighing on the euro," said Ayako Sera, senior
market economist at Sumitomo Mitsui Trust.
In the United States, consumer spending recorded its biggest
increase in four months in April and monthly inflation
rebounded, pointing to firming domestic demand that could allow
the Federal Reserve to raise interest rates in June.
But some market participants say signs of softness in some
economic data have raised questions about whether the Fed can
hike interest rates two more times this year and begin shrinking
its balance sheet.
(Additional reporting by Lisa Twaronite; Editing by Eric Meijer
and Richard Borsuk)