Peter Nurse

Investing.com – The U.S. dollar climbed higher in early European trade Monday, gaining ground even against the euro despite Emmanuel Macron’s win in the French presidential election as traders sought out this safe haven.

At 03:05 ET (705 GMT), the Greenback Against Six Other Currency Index (the ) traded 0.4% higher at 101.625. This is the highest level since late 2016.

The French president claimed victory in the election against Marine Le Pen, his far-right opponent. This result gave the euro a slight boost, as it provided stability for the European Union and prevented the promotion of an eurosceptic politician.

However, gains in the one currency were temporary as traders resorted to safety from the dollar because of uncertainties about the global growth outlook and tightening monetary policy by the U.S. Federal Reserve.

“The U.S. dollar is having a good month,” said Marc Chandler, chief market strategist at Bannockburn Global Forex. “Against the euro and yen, it is appreciating for the fourth consecutive month. The main driver of the increase in rates is still being identified. The divergence of monetary policy is palpable.”

Federal Reserve Chairman Jerome Powell last week pointed to the possibility of a 50 basis point rate hike at the central bank’s next meeting in May, speeding up its monetary policy tightening after hiking by 25 basis points in March.

By contrast, Japan’s central bank has been sticking rigidly to its very accommodative stance, while Europe, and thus the euro, is more exposed to the stagflationary forces emerging from the war in Ukraine. 

Recent cuts by the International Monetary Fund in its Eurozone forecast have reduced it to 2.8%, from 3.9%. The bloc will publish its first estimate of first quarter GDP on Friday, and it is expected to have risen by 0.3% quarter-over-quarter.

Traded 0.4% lower at 128.09, moving back from the highest point in 20 years. The dollar gained approximately 11% against the Japanese yen thus far this year.

After initially opening higher, the stock fell 0.6% and dropped to 1.0727. This is a two-year low.

Elsewhere, rose 0.8% to 6.5518, climbing to a new one-year high, as the ongoing COVID-19 outbreak prompted concerns over the economic growth outlook of the world’s second largest economy.

China’s capital Beijing reported over the weekend dozens of COVID-19 cases, prompting concerns of a prolonged strict lockdown akin to that in the financial hub of Shanghai.

fell 0.9% to 1.2732, with last week’s disappointing British and data pointing to a possible slowdown in the Bank of England’s tightening cycle.