Euro gains respite from Macron's French election lead

By Iain Withers

LONDON (Reuters) - The euro looked set to snap a seven-day losing streak versus the dollar on Monday, as the single currency rallied after French leader Emmanuel Macron beat far right challenger Marine Le Pen in the country's first round of presidential voting.

Investor concerns about the future direction of the euro zone's second-biggest economy have weighed on the euro and added to worries over the economic costs of war in Ukraine.

Meanwhile, the dollar has been pushed higher by rising U.S. yields and expectations the Federal Reserve will act quickly to stem inflation.

Macron will face Le Pen in what promises to be a tightly fought French presidential election runoff on April 24.

Nonetheless, Macron's lead in the first round provided some respite for the euro - lifting it by as much as three quarters of a percent in Asian trading hours to $1.0955. It was last up 0.4% at $1.09150.

Currency analysts said the contest remained on a knife-edge with negative implications for the euro.

"The narrower than expected victory for President Macron will keep alive fears that there is an outside chance that Le Pen can become president," analysts at MUFG said in a note.

"The first-round results and the opinion polls pointing towards a close result in the second round will remain a modest weight on the euro in the coming weeks."

The dollar index - which tracks the greenback against a basket of six peers - was broadly flat on the day, just shy of the 100 mark hit last week for the first time in nearly two years.

As the dollar has gained ground, the Japanese yen has been subjected to some of the strongest selling pressure, with investors seeing little reason to exit bets against the yen while the Bank of Japan holds yields near zero.

The yen fell to a seven-year low versus the dollar on the day of 125.435 yen per dollar. It was last down three quarters of a percent at 125.19.

"There's nothing there to frighten people out of dollar/yen positions," said National Australia Bank's head of foreign exchange Ray Attrill. "So onwards and upwards for dollar/yen."

The dollar gained as much as 0.5% versus the Australian and New Zealand dollars on the day, before its gains were pared.

Sterling was broadly flat versus the dollar at $1.30290.

The Russian rouble weakened in jittery trade on Monday, reversing some of the previous week's gains, after the central bank decided to relax temporary capital control measures.

(Reporting by Iain Withers, Additional reporting by Tom Westbrook in Singapore; editing by Barbara Lewis)