The euro notched its biggest daily gain in nearly a year Monday after the first round of the French election eased concerns about the future of the currency, while the U.S. dollar fell to its lowest level since early November.
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The euro rose 1.3% against the dollar to $1.0868 at the close of New York trading, its biggest daily percentage gain since last June. The euro also rose about 2% against the Japanese yen.
Investors poured into European assets broadly after centrist candidate Emmanuel Macron won the most votes in the first round of France's presidential election. Investors also embraced riskier assets such as emerging market currencies with election risks diminished. The dollar fell 0.4% against the Mexican peso and 1.9% against the Turkish lira. The Japanese yen, which benefits in times of market uncertainty, fell against most peers.
Mr. Macron took 23.8% of the vote and is now the overwhelming favorite to win May's second round vote against second placed Marine Le Pen, whose threats to pull France out of the euro had raised fears about the future of the currency.
The election outcome should continue to support the euro, said Bilal Hafeez, global head of G-10 FX strategy at Nomura, in a research note.
"The markets can price out the risk of a far-right victory," said Mr. Hafeez in a research note. "All of this means markets can finally focus on the positive macro picture of the euro-area: higher growth than the U.S., a large current account surplus and core inflation turning higher."
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Meanwhile, the dollar continues to give back gains reaped after the November U.S. presidential election. The euro's strength drove the WSJ Dollar Index, which measures the U.S. currency against 16 others, down 0.3% to its lowest level since Nov. 9, the day after the election of President Donald Trump sent the currency soaring to 14-year-highs.
Investors have grown cautious on the dollar in recent months amid signs that the U.S. economy is slowing, questions over the path for U.S. interest-rate increases and political uncertainty surrounding the Trump administration.
President Donald Trump has said he would make a "big announcement" about taxes this week.
The Wall Street Journal reported Monday that Mr. Trump has ordered White House aides to draft a tax plan that slashes the corporate tax rate to 15%. Officials are also facing a potential government shutdown on Friday.
Delays in implementing the administration's tax reform and fiscal stimulus plans have weighed on the dollar recently.
--Riva Gold and Mike Bird contributed to this article.