The euro fell against the dollar on Wednesday after a media report that France’s government is leaning toward reinstating a national lockdown to curb a resurgence in coronavirus infections.
The dollar strengthened slightly against other major currencies, but sentiment for the greenback is turning bearish due to uncertainty about the outcome of the U.S. presidential election next week.
Traders are bracing for more volatile trade in currency markets because the coronavirus is spreading rapidly again in Europe, Britain, and the United States, which threatens economic growth. Concern about the U.S. elections is another major risk that will keep currencies on edge.
“The coronavirus spike is certainly a concern for France and southern Europe, so the euro’s upside is heavy,” said Junichi Ishikawa, senior foreign exchange strategist at IG Securities in Tokyo.
“I don’t expect the dollar to gain much against elsewhere, because people have been overly complacent about how markets will react after the U.S. election.”
The euro fell 0.15% to $1.1780 in Asia on Wednesday, down for a third consecutive trading session.
The dollar steadied at 104.50 yen after a 0.4% decline on Tuesday that brought it close to a one-month low.
French President Emmanuel Macron will give a televised address on Wednesday evening.
His office did not say what the speech is about, but French media reported on Tuesday that the government is exploring bringing in a national lockdown from midnight on Thursday.
A second wave of coronavirus infections in many countries ahead of winter in the northern hemisphere has fanned concerns that economic growth will weaken once again.
Traders say the bigger focus is on the United States, which is also struggling to contain the coronavirus as people vote early before elections on Nov. 3.
Domestic polls show Democrat rival Joe Biden has a lead over Republican incumbent President Donald Trump, but some investors are skeptical because the polls did not predict Trump’s election four years ago.
Legal battles between Republicans and Democrats over how to count votes have raised the risk that the outcome of the election will be disputed, which is a negative factor for the dollar, some analysts say.
Sentiment for the greenback has also weakened after Trump conceded that an additional round of U.S. fiscal stimulus is unlikely before the election.
The Australian dollar remained lower after data showed consumer prices in the third quarter rose 1.6% from the previous quarter, which was slightly more than the median estimate.
The Reserve Bank of Australia is widely expected to lower interest rates and expand its government debt purchases at its next meeting on Nov. 3.