LONDON: The euro rose from an 11-month low against a broadly weaker dollar on Monday with political developments seen easing uncertainty surrounding next year's German and French elections, lending some support to the currency.
Although German Chancellor Angela Merkel's announcement on Sunday that she would seek a fourth term in office did not come as a surprise, it was regarded by strategists as positive for the euro.
Merkel is seen as a defender of liberal democracy in the West at a time when investors are worried that a wave of populism and anti-globalisation sentiment is spreading across Europe and threatening the break-up of the euro zone.
The euro climbed half a percent to $1.0645, having touched its weakest levels since December 2015 on Friday.
"If Merkel is going for chancellor again, even if she has to be in a grand coalition, the likelihood is that she will be re-elected ... That creates some stability from a European perspective," said UBS's head of currency strategy in Zurich, Constantin Bolz.
In France, former president Nicolas Sarkozy was ousted in a party primary from the election race over the weekend, leaving ex-prime ministers Francois Fillon and Alain Juppe to battle it out to become the centre-right Republicains' candidate for the presidential election in May.
The winner is expected to face far-right, anti-EU National Front leader Marine Le Pen. Some analysts said the defeat of the deeply unpopular Sarkozy had lessened the prospects of her winning, easing investor fears about a break-up of the euro zone.
Others, however, maintained that the socially conservative and pro-business Fillon - who won the first round primary ballot with 44 percent of the vote - increased the perceived risk that Le Pen could take power, as he lacked the broad appeal of the more centrist Juppe.
"There had been some concern that if Sarkozy was up against Le Pen, that would not be a particularly good circumstance," Rabobank currency strategist Jane Foley said in London.
"The market has always been fairly confident that Le Pen would fail to win the second (presidential election) round, but after the Trump victory, markets began to get a little doubtful about what opinion polls were suggesting."
Strategists said that the euro had also been boosted by a slight weakening of the dollar, which was down 0.2 percent against a basket of currencies after hitting its highest levels in almost 14 years on Friday.
The greenback has climbed more than 3 percent since the victory of Donald Trump in the US presidential election on Nov. 8. Investors bet that a Trump administration will adopt expansionary fiscal policies leading to interest rate rises.
Most market participants expect the US Federal Reserve to hike rates at its Dec. 13-14 policy meeting.
Against the yen, the dollar hit a six-month high of 111.190 yen, before easing back to 110.50, down a third of a percent on the day.
Data from the Commodity Futures Trading Commission released on Friday showed that speculators trimmed their dollar bets in the week through Nov. 15, as profit-taking reduced net long positions after they had risen seven straight weeks.
Japanese yen net longs, meanwhile, posted their lowest level since early June, the data showed, with the yen a casualty of the dollar's strong rally.
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