Euro slipped to a two-month low against the yen on Monday, after German Chancellor Angela Merkel's failed effort to form a three-way coalition government, fuelling political uncertainty in the euro zone's largest economy.
After winning an election with a narrower margin in September, Merkel’s conservatives were left weakened. Merkel said that she would inform the German president that she could not form a coalition, after the pro-business Free Democrats (FDP) withdrew from negotiations.
The Reserve Bank of Australia will release minutes from the recent policy meeting overnight. RBA sees growth in December 2017 of 2.5 percent easing back from 2-3 percent in the previous forecast issued in August. The weaker outlook for rising inflation adds to expectations that the Reserve Bank will leave the cash rate on hold at the historic low of 1.5 percent indefinitely. AUSD/USD traded in a narrow range of 0.75737 to 0.75502 overnight.
EUR/JPY recovered from its lows at 131.17 and is now trading 0.2 percent higher at 132.38. EUR/USD is up to 1.1808 after touching 1.1722 overnight.
The euro's retreat had helped support the dollar against a basket of six major currencies, with the dollar index edging up 0.3 percent to 93.968.
USD/JPY is up to 112.22 after having set a one-month low of 111.89 yen earlier on Monday.
