FOREX-Euro weakens on report Germany's Merkel won't seek re-election as party chair
* Euro falls briefly on Merkel report
* Dollar near 10-week high
* Major currencies stick to tight ranges
* Yen strengthens as investors seek safety from equitylosses
* Graphic: World FX rates in 2018 (Recasts with Merkel report, adds quote, updates prices)
By Tom Finn
LONDON, Oct 29 (Reuters) - The euro briefly weakened onMonday after a report that German Chancellor Angela Merkel willnot seek re-election as party chairwoman, marking the end of a13-year era in which she has dominated European politics.
The euro fell 0.4 percent to hit a day's low of $1.136 after senior party sources made the announcement,effectively clearing the way for her Christian Democrats partyto groom her successor. The currency later recovered to trade flat on the day at$1.14.
Merkel has loomed large on the European stage since 2005,helping guide the EU through the euro zone crisis and openingGermany's doors to migrants fleeing war in the Middle East in2015 - a move that still divides the bloc and Germany.
"The euro has come under some pressure because she is seenas a pro-European force despite being a tough negotiator when itcomes to bail-outs," said Ulrich Leuchtmann, a currencystrategist at Commerzbank.
Merkel's weakness at home may limit her capacity to lead inthe European Union at a time when the bloc is dealing withBrexit and a budget crisis in Italy.
The dollar rose towards a 10-week high against a basket ofother currencies as concerns about global growth pervadedmarkets.
World stocks have sold off in October, beset by worries overcorporate earnings and geopolitical uncertainty.
That has lifted the greenback, a currency which typicallyoutperforms in risk-off periods but has strengthened onlymoderately.
"This likely reflects a number of factors, including longdollar positioning and, by the end of this week, some modestrepricing of Federal Reserve expectations," said Zach Pandl,co-head of foreign exchange at Goldman Sachs.
The dollar index rose 0.2 percent to 96.670 aftergaining 0.7 percent last week when it hit a ten-month high.
The duelling tariffs imposed by the United States and Chinahave also lifted the dollar. The market has assumed that whilethe U.S. economy will be hit by reduced trade, it will be hurtless than its trading partners.
"Keeping the dollar bid this week should be a continuationof strong U.S. data. At the same time, we will be watchingdevelopments in China," ING's head of FX strategy Chris Turnersaid.
After weekend data showing Chinese profit growth slowed forthe fifth straight month in September, China's offshore yuanweakened, though it remained above Friday's trough of 6.977 , the weakest since January last year, as it creepsever closer to 7.00.
"Were the 7 level to be breached, we would expect USD/Asia,and probably USD/EM in general, to take another leg higher andthe dollar to be bid across the board," Turner said.
The U.S. economy slowed less than expected in the thirdquarter, data showed on Friday, as the strongest consumerspending in nearly four years and a surge in inventoryinvestment offset a tariff-related drop in soybean exports.
BOLSONARO WINS
Among emerging markets, Brazilian-linked stocks got a liftfrom the victory in the country's presidential election offar-right candidate Jair Bolsonaro, who campaigned on promisesto clean up politics and crack down on crime.
As of 1130 GMT, the real had not yet traded. It hadended Friday's session at 3.6426 per dollar.
The safe-haven Japanese yen has benefited from theglobal sell-off in riskier assets as investors unwound carrytrade exposures. It gained 0.6 percent last week and on Mondaytraded flat at 111.96 per dollar.
Investors will be watching the Bank of Japan's monetarypolicy announcement, due on Wednesday.
Sterling held near a two-month trough of $1.2775before Britain's annual budget due on Monday.
Finance Minister Philip Hammond is likely to urge hisConservative Party to back the government's plan for Brexit, orput at risk a long-awaited easing of austerity.
(Additional reporting by Daniel Leussink in Tokyo, editing byLarry King and Ed Osmond)
tom.finn.reuters.com@reuters.net)) Disclaimer: The views expressed in this article are those of the author and may not reflect those of Kitco Metals Inc. The author has made every effort to ensure accuracy of information provided; however, neither Kitco Metals Inc. nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in commodities, securities or other financial instruments. Kitco Metals Inc. and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.
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