Euro rebounds as France faces hung parliament, dollar dips
Updated at 1000 EDT
By Karen Brettell
July 8 (Reuters) -The euro touched a more than three-week high against the dollar on Monday, recovering overnight losses as France's election pointed to a hung parliament.
The dollar, meanwhile, crept downward, after U.S. payrolls data on Friday boosted bets that the Federal Reserve will soon start cutting interest rates.
French President Emmanuel Macron on Monday asked his prime minister to stay in the role for now, pending what will be difficult negotiations to form a new government after a surprise left-wing surge in elections that delivered a hung parliament.
"If anything, it probably leads to a little bit of instability in terms of the government structure there now," said Brad Bechtel, global head of FX at Jefferies in New York. So far, however, he noted the market reaction to the election result has been "relatively subdued".
The euro EUR=EBS was last up 0.04% at $1.0840 and rose as high as $1.0845, the highest since June 12. It dipped to $1.07915 earlier in the day.
The dollar index =USD, which measures the U.S. currency against the euro, sterling, yen and three other major rivals, fell 0.12% to 104.82 and got as low as 104.80, the lowest since June 13.
The greenback fell on Friday after June's employment report showed solid jobs gains in the month, but softer details under the hood.
Government and healthcare services hiring made up about three-quarters of the payrolls gain and the unemployment rate hit a 2-1/2-year high of 4.1%.
The economy also created 111,000 fewer jobs in April and May than previously estimated, while annual wages increased at the slowest pace in three years.
Traders currently set about 77% odds for a rate cut at the Fed's September meeting, up from 65% a week ago, according to the CME Group's FedWatch Tool. A subsequent cut is expected by December.
The dollar fell against the Japanese yen, reversing earlier gains. Data on Monday showed Japanese workers saw their average base pay climb 2.5% in May, the fastest pace in 31 years.
The Bank of Japan said wage hikes were broadening across the economy due to tight labor market conditions, signaling its confidence the country was making progress toward durably achieving its 2% inflation target.
The optimistic assessment may heighten the case for the central bank to raise interest rates as soon as its next meeting on July 30-31.
The dollar was last down 0.08% at 160.59 JPY=EBS, holding below last week's 38-year high of 161.96.
Sterling rose to a 3-1/2 week top versus the dollar and the euro, building on the gains following the Labour Party's landslide election victory last week, which ended 14 years of Conservative rule. It GBP=D3 was last up 0.24% at $1.2838.
The Aussie dollar AUD=D3 fell 0.04% to $0.6746, having earlier reached $0.67615, the highest since Jan. 3.
In cryptocurrencies, bitcoin gained 1.44% to $57,166.
Reporting By Karen Brettell; Additional reporting by Kevin Buckland and Amanda Cooper; Editing by Arun Koyyur
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