Published : 5 days ago, on 04/12/2024

By Gertrude Chavez-Dreyfuss

NEW YORK (Reuters) -The euro rose modestly against the U.S. dollar on Tuesday, as political turmoil in France sent traders scrambling for hedging protection against further price swings, with some market participants noting that the crisis could be nearing the end.

The South Korean won, meanwhile, was one of the biggest movers, plunging against the U.S. dollar to a more than two-year low after South Korean President Yoon Suk Yeol declared martial law in an unannounced late-night address on television.

But the won recouped some of its losses later on Tuesday after Yoon said he would move to lift martial law he had imposed just hours before. Yoon’s martial law declaration was unanimously voted down by 190 lawmakers in parliament, with his own party urging him to lift the decree.

The dollar, on the other hand, briefly rose after data showed U.S. job openings increased moderately in October while layoffs declined, even as Federal Reserve officials on Tuesday did not provide definitive guidance on what they intend to do at their policy meeting later this month.

With political tension in South Korea partly easing, investors focused on one of the major stories hobbling the euro zone: French politics.

French Prime Minister Michel Barnier faces a vote of no confidence on Wednesday after fierce opposition from across the political spectrum to his budget, which contains painful tax rises and spending cuts aimed at repairing the country’s precarious finances.

“We’re at the tail end of the crisis,” said Marc Chandler, chief market strategist at Bannockburn Forex in New York.

“Tomorrow, there is a vote of no confidence. It passes, but they can’t have an election until next July. So what they’ll probably do is appoint a prime minister and try again, or let Barnier become the caretaker prime minister and pass some laws to keep the government going until July.”

Demand for hedges, as reflected by euro options volatility, has hit its highest since March 2023 this week and, with the combination of a string of weak data, political uncertainty in major euro zone economies and the seemingly unstoppable dollar, the single European currency could struggle.

The euro, which had been the weakest G10 currency through November, began this month with a 0.7% fall on Monday and was last up 0.1% at $1.0507, as France’s government headed for collapse over the budget impasse. [EUR/GVD]

SOUTH KOREAN DRAMA

The Korean currency fell to as low as 1,443.40 won per dollar, the lowest since October 2022, in the immediate aftermath of the martial law declaration. It was last down 1% at 1,418.35 after Yoon lifted martial law.

Yoon earlier said he had no choice but to resort to martial law in order to protect the liberal democracy, saying opposition parties have taken hostage of the parliamentary process to throw the country into a crisis.

The dollar slipped versus the yen to 149.55 yen, while the euro traded flat against the Japanese unit at 157.12 yen. Traders are growing increasingly confident that Japan may hike interest rates this month.

The won sank to its lowest since May 2023 against the yen, and was last down 0.9% at 1,052.

The Chinese yuan, another currency to watch with the incoming administration of President-elect Donald Trump in the United States, hit a 13-month low on tariff risks and weakness in China’s economy.

The yuan had already sold off in anticipation of more tariffs from Trump and improving U.S. manufacturing data, and a dive in Chinese bond yields to record lows has pulled the currency toward 7.3 per dollar for the first time since last November. [CNY/]

China fixed the yuan’s trading band at its weakest in more than a year and traders ran with it to sell the currency at 7.2996 per dollar. The Chinese unit last traded at 7.2850 per dollar, slightly down 0.2%. It traded at 7.24 on Friday. [CNY/]

The U.S. dollar index was little changed to slightly down on the day at 106.33. It trimmed losses after data showed job openings, a measure of labor demand, had risen 372,000 to 7.744 million by the last day of October, according to the Bureau of Labor Statistics’ Job Openings and Labor Turnover Survey, or JOLTS report.

U.S. fed funds futures priced in a 70% chance of a 25 basis-point cut this month, and 30% odds of a pause, according to LSEG calculations, little changed from late Monday.

Three Fed officials spoke on Wednesday and said they all saw inflation progressing toward their 2% target but none pushed strongly for or against doing so when they next meet to set rates in two weeks.

Currency

bid

prices at

3

December​

09:19

p.m. GMT

Descripti RIC Last U.S. Pct YTD Pct High Low

on Close Change Bid Bid

Previous

Session

Dollar 106.34 106.37 -0.03% 4.90% 106.6 106.

index 08

Euro/Doll 1.0507 1.0498 0.09% -4.8% $1.0535 $1.0

ar 481

Dollar/Ye 149.55 149.57 -0.21% 5.82% 150.195 148.

n 675

Euro/Yen 1.0507​ 157.02 0.08% 0.97% 157.98 156.

19

Dollar/Sw 0.8863 0.8864 0% 5.32% 0.8889 0.88

iss 3

Sterling/ 1.2669 1.2657 0.12% -0.42% $1.27 $1.2

Dollar 638​

Dollar/Ca 1.4067 1.4046 0.17% 6.14% 1.4076 1.40

nadian 1

Aussie/Do 0.6481 0.6476 0.13% -4.9% $0.6505 $0.6

llar 456

Euro/Swis 0.931 0.9305 0.05% 0.26% 0.9324 0.92

s 92

Euro/Ster 0.8291 0.8294 -0.04% -4.35% 0.8312 0.82

ling 88

NZ 0.5877 0.5888 -0.18% -6.99% $0.5905 0.58

Dollar/Do 65

llar

Dollar/No 11.0676​ 11.0891 -0.2% 9.2% 11.1303 11.0

rway 279

Euro/Norw 11.6296 11.652 -0.19% 3.61% 11.677 11.6

ay 175

Dollar/Sw 11.0102 10.9876 0.21% 9.37% 11.0273 10.9

eden 705

Euro/Swed 11.5702 11.538 0.28% 4% 11.5855 11.5

en 357

(Reporting by Gertrude Chavez-Dreyfuss; Additional reporting by Amanda Cooper in London and Tom Westbrook in Singapore; Editing by Nicholas Yong, Kirsten Donovan and Susan Fenton)