Euro Drops on French Election; Australian Dollar Declines

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The euro fell for the first time in five days against the yen amid concern the outcome of French presidential elections will disrupt efforts to stem the region’s debt crisis.

Australia’s dollar slid after a report showed the nation’s producer prices fell last quarter, adding to speculation the Reserve Bank will cut interest rates. The yen rose against all of its major peers as France’s Socialist challenger Francois Hollande won more of the first-round vote than incumbent Nicolas Sarkozy, boosting demand for haven assets.

“There is plenty of risk in the French election,” said Junichi Ishikawa, an analyst at IG Markets Securities Ltd. in Tokyo. “Hollande’s victory may mean a collapse of the ‘Merkozy’ axis and that would hamper efforts on the debt crisis,” Ishikawa said, referring to cooperation between Sarkozy and German Chancellor Angela Merkel.

The euro weakened 1.1 percent to 106.57 yen at 8:37 a.m. London time. It dropped 0.6 percent to $1.3140. The Japanese currency strengthened 0.5 percent to 81.09 per dollar.

The Australian dollar fell 0.7 percent to $1.0311 and slid 1.2 percent to 83.60 yen.
Pressure on Sarkozy

Hollande won 28.5 percent of the vote against 27.1 percent for Sarkozy yesterday, the interior ministry said in Paris. Marine Le Pen’s National Front got 18.1 percent of the vote, a record for the party, adding to pressure on Sarkozy to court supporters from the anti-euro Le Pen. The second ballot takes place on May 6.

In the Netherlands, Prime Minister Mark Rutte will meet his cabinet today to discuss a strategy for passing a budget that meets European Union targets. Early elections will probably be called after Geert Wilders’s Freedom Party withdrew its support for the minority government on April 21.

The so-called Aussie dollar declined against all 16 of its major peers. Australia’s producer price index dropped 0.3 percent in the January-to-March period from the prior quarter, when it gained 0.3 percent, the Bureau of Statistics said in Sydney today. The index was forecast to climb 0.4 percent, according to the median estimate in a Bloomberg News survey.