LONDON: The dollar recovered Tuesday, helping to lift European stock markets, as investors tracked political unrest on both sides of the Atlantic.
"The forex markets dominated... with both the pound and euro having a rough time of it," noted Spreadex financial analyst Connor Campbell.
"This was good news for the European indices. The FTSE, always happy when sterling sinks lower, jumped more than half a percent to re-cross 7,200."
London's benchmark FTSE 100 has benefitted in recent months from a sharp drop in sterling following Britain's vote for Brexit.
This is because the index is loaded with multi-nationals earning in currencies other than the pound.
On Tuesday and after hitting a two-month low at 111.60 yen in Asian trading hours, the dollar hit back around to trade above 112 yen around midday in Europe.
Gold, which like yen is seen as a haven investment in times of uncertainty, reached a two-month high at $1,237.17 an ounce, before easing back to around $1,229.
There is unease across global stock markets surrounding the US presidency of Donald Trump as well as over upcoming European elections.
France and Germany hold general elections this year which may see a surge in support for populist parties, in turn threatening a break-up of the European Union.
"The market's tone has been one of risk-off, as political fallout in both Europe and the United States is weighing on investor resolve, imposing an unpalatable risk on investor sentiment," said Stephen Innes, senior trader at Oanda.
European Central Bank boss Mario Draghi on Monday said that "risks to the euro area outlook remain tilted to the downside and relate predominantly to global factors", and he stood ready to further ease monetary policy if necessary.
"Draghi's comments yesterday about the need for stimulus in the eurozone despite rising inflation, alongside the damage the currency would suffer if Marine Le Pen becomes the next French president, are dragging" the euro lower, added analyst Campbell.
French far-right leader Le Pen on Sunday vowed that she would be a president who puts France first as she formally launched a campaign echoing many of the themes that propelled Trump to the White House.
- Key figures around 1100 GMT -
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London - FTSE 100: UP 0.6 percent at 7,216.78 points
Frankfurt - DAX 30: UP 0.5 percent at 11,565.11
Paris - CAC 40: UP 0.1 percent at 4,784.80
EURO STOXX 50: UP 0.3 percent at 3,246.87
Tokyo - Nikkei 225: DOWN 0.4 percent at 18,910.78 (close)
Hong Kong - Hang Seng: DOWN 0.1 percent at 23,331.57 (close)
Shanghai - Composite: DOWN 0.1 at 3,153.09 (close)
New York - Dow: DOWN 0.1 percent at 20,052.42 (close)
Euro/dollar: DOWN at $1.0659 from $1.0752
Pound/dollar: DOWN at $1.2366 from $1.2470
Dollar/yen: UP at 112.36 yen from 111.70 yen
Oil - Brent North Sea: DOWN 23 cents at $55.49 per barrel
Oil - West Texas Intermediate: DOWN 21 cents at $52.80
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