The euro weakened against the U.S. dollar on Friday as investors braced for Sunday’s first round of a tight French presidential election.
The euro was down 0.14 percent against the dollar at $1.0699, off the session low of $1.0683. The common currency was 0.33 percent lower against the yen and down 0.27 percent against the Swiss franc.
“We have got overall de-risking happening. You have people keeping the powder dry ahead of Sunday,” said Karl Schamotta, director of global product and market strategy at Cambridge Global Payments in Toronto.
“Traders are looking liquidity and countries with a strong net international position.”
Opinion polls suggest that France’s election will likely come down to a second-round duel between independent centrist Emmanuel Macron and Marine Le Pen, head of the anti-European Union and anti-immigrant National Front.
Polls showing Macron in pole position ahead of the vote and an upbeat Purchasing Managers’ Index survey from France helped steady investors’ nerves somewhat and the euro was still on pace for its best week in 11 against the dollar.
Still, the options markets suggests investors are concerned about the chances of strong results for far-right candidate Le Pen and far-left rival Jean-Luc Melenchon.
The dollar, which has been pressured lately by weaker-than-expected economic data and worries about the Trump administration’s ability to pass tax and fiscal stimulus legislation, rose on Friday as traders squared up positions ahead of the weekend.
The dollar index, which tracks the U.S. currency against a basket of six major rivals, was up 0.14 percent at 99.913. The greenback added to gains after President Donald Trump’s told the Associated Press that he will unveil a tax plan next week that includes “massive” tax cuts for individuals and businesses.
The Canadian dollar weakened against its U.S. counterpart to a six-week low as cooler-than-expected domestic inflation reduced pressure on the Bank of Canada to consider interest-rate hikes.
The upcoming election also weighed on the Canadian dollar and the currency could come under further pressure if global risk sentiment took a hit on the results on Sunday, Schamotta said.
Other major currency pairs were trading in tight ranges, with Britain’s weakest quarterly retail sales number in five years doing minimal damage to sterling after a 4-cent surge earlier this week.