* Euro eases from 6-month high vs dollar, 1-year high vs yen
* Dollar index rises above 6-month low plumbed earlier
* Graphic: World FX rates in 2017 tmsnrt.rs/2egbfVh
By Ritvik Carvalho
LONDON, May 8 The euro retreated on Monday from
highs hit on centrist Emmanuel Macron's victory in France's
presidential election, with investors taking profit on a roughly
3 percent gain for the currency since he won the first round two
Macron's resounding defeat of nationalist Marine Le Pen has
relieved investors who had feared another populist upheaval
after Britain's vote to exit the European Union and Donald
Trump's election as U.S. president last year.
But after opinion polls had shown Macron consistently around
20 percentage points or more in front, his crushing victory on
Sunday was widely expected.
In early Asian trading the euro rose as high as $1.1024
, its highest since Nov. 9. It also jumped to a one-year
high of 124.58 yen.
But by midday in Europe, it had fallen back 0.4 percent to
$1.0953 against the dollar, and 0.6 percent to 123.33 yen.
"The euro has had two successive positive weeks on the back
of the expectation that Emmanuel Macron would win," said Michael
Hewson, chief markets analyst at CMC Markets in London, who said
markets had largely priced in Macron's victory.
The removal of the political risk investors had associated
with Le Pen - who had promised to take France out of the euro -
leaves them refocusing on economic fundamentals and the relative
pace of monetary policy normalisation in Europe and the United
Short positions on the euro reached their lowest level since
early May 2014 in the week up to last Tuesday, data showed on
"It's really a question now of what's going to happen next
with respect to the U.S. Federal Reserve with one rate rise
priced in between now and the end of the year, and what's the
probability that the European Central Bank will look to taper
monetary policy before the end of the year," Hewson said.
U.S. job numbers released on Friday were solid and yield
spreads back the dollar over the euro. But traders are also
growing more confident about the prospect of the European
Central Bank at some point moving away from its bond-buying
The dollar was slightly lower on the day at 112.63 yen
, after jumping to a seven-week high of 113.14 yen in
The dollar index, which tracks the U.S. currency against a
basket of six rivals, added 0.2 percent to 98.963, after
dipping as low as 98.543 earlier, its lowest since November.
Friday's U.S. employment data, showed nonfarm payrolls rose
by 211,000 in April. The unemployment rate fell to 4.4 percent,
near a 10-year low and well below the most recent Federal
Reserve median forecast for full employment.
But job growth in March was revised downward, and the labour
force participation rate dipped slightly. Overall, the figures
did not appreciably alter market expectations that the U.S.
Federal Reserve is on track to raise interest rates next month.
Analysts at Commerzbank said a slack in U.S. wage growth
could begin to stop supporting the dollar.
But Barclays currency strategist Hamish Pepper said wage
inflation would ultimately follow from growing labour market
"If we construct an output gap for the U.S. using labour
market variables, it still tells us that there’s a fair amount
of capacity pressure in the economy and that wage inflation
should follow from that," he said.
"So even though you may not be seeing it now, the indicators
are that you should see it going forward, and that's what policy
has to respond to."
U.S. retail sales and core inflation data this week could
add to evidence backing expectations of a Fed hike.
For Reuters Live Markets blog on European and UK stock
markets see reuters://realtime/verb=Open/url=http://emea1.apps.cp.extranet.thomsonreuters.biz/cms/?pageId=livemarkets
(Additional reporting by Tokyo markets team,; Editing by Mark
Trevelyan and Ed Osmond)