Investing.com – The dollar rose sharply against a basket of major currencies on Monday, benefitting from a slump in the euro in the wake of elections in Germany which saw support for German chancellor Angela Merkel’s Conservative Alliance slump to its lowest since 1949.
EUR/USD started the week on the back foot, falling 0.95% to $1.1843, as Merkel’s Christian Democratic Union had their worst election showing since 1949, ceding ground to the far-right Alternative for Germany (AfD) party.
The somewhat pyrrhic victory complicates Merkel’s efforts to stitch together a complicated three-way coalition that can withstand pressure from the anti-immigration AfD party, which garnered about 13% of the vote, becoming the first far-right party to win seats in parliament in more than 50 years.
The dollar capitalized on the euro slump, hitting a two-week high but renewed geopolitical uncertainty on the Korean Peninsula limited gains as demand grew for safe haven currencies like the yen and Swiss franc.
The U.S. dollar index, which measures the greenback’s strength against a trade-weighted basket of six major currencies, rose by 0.57% to 92.47.
North Korean Foreign minister Ri Yong Ho, described President Donald Trump’s recent tweets about the country as “clearly a declaration of war,” warning that Pyongyang has the right to shoot down U.S. bombers.
"The whole world should clearly remember it was the US who first declared war on our country." North Korea Foreign Minister Ri Yong said.
"Since the United States declared war on our country, we will have every right to make countermeasures, including the right to shoot down United States strategic bombers even when they are not inside the airspace border of our country," Ri said.
USD/JPY fell 0.36% to Y111.59 while USD/CHF lost 0.25% to 0.9669.
Sterling pared recent gains against the greenback dropping 0.42% to $1.3453, as the fourth round of brexit negotiations between UK Brexit Secretary David Davis and EU negotiator Michel Barnier got underway on Monday.
USD/CAD tacked on 0.14% to C$1.2356 while AUD/USD fell 0.15% to $0.7942.