The euro rode out signs of gains for far-right French presidential candidate Marine Le Pen on Monday, inching higher against the dollar and the yen in trade held in check by the absence of US investors because of a holiday. French bond yields - the main measure of market concern over Le Pen's chances in April and May - showed the biggest gap to German equivalents since 2012 after a poll showed the head-to-head gap to centrist favourite Emmanuel Macron closing.
But the euro held on to some minimal gains, gaining 0.1 percent to $1.0616 and 0.3 percent to 120.06 yen respectively.
"This stuff is getting played out in the OAT (French government) yields rather than the currency," said the head of FX sales with one large international bank in London.
"I think most people think Le Pen will make it through to the second round and then won't get any further. That is just the consensus at the moment."
News that Socialist Benoit Hamon and hard-left rival Jean-Luc Melanchon were discussing cooperation in their bid for the presidency weakened the euro and supported the yen on Friday.
Investors believe such a tie-up could either backfire and propel anti-globalisation, anti-EU candidate Le Pen into the Elysee palace or succeed and land France with a far-left president pursuing deficit-boosting economic policies.
But policy proposals outlined by Melanchon on Sunday underscored the gap he would have to bridge with Hamon to find a common platform for the April and May polls, also helping the euro.
"If they did unite then any outcome would be a bad outcome from the market's point of view," said Richard Benson, co-head of portfolio investment with currency fund Millennium Global in London.
"It was what caused the risk-off move on Friday, although the interesting thing was it seemed to play out more on dollar-yen than the euro. In general the market does seem very nervous."
The start of 2017 on currency markets has been dominated by disappointment with US President Donald Trump's early fiscal and tax policies, turning back a reflation trade on the dollar that had bet on swift moves to encourage repatriation of capital to the United States and boost spending.
Millennium's Benson said Trump's State of the Union speech in 10 days' time might be crucial for those trades.
Trade on Monday was cooled, however, by the absence of US markets for the Presidents Day holiday.
Stock markets in both Europe and Asia eked out some gains, pointing to a broadly more positive mood. That tends to benefit several of the major currencies at the expense of "safe havens" like the yen and Swiss franc.
The latest analysis of investment flows from the world's biggest currency trader, Citi, showed the dollar is the most sold of the G10 group of major currencies over the past four weeks. Commodity Futures Trading Commission data on Friday showed speculators had reduced bullish bets on the dollar to their lowest in four months.
The past week had seen investors sell the commodity-price related Australian and New Zealand dollars, they said.
"Overall, the big picture in Citi's flow is "caution". We are recording a bearish shift from client flows three weeks ago, and that keeps us defensive," they said. In a weekly note sent to media on Monday, J.P. Morgan analysts also stuck with their call to "short" - bet against - the dollar in favour of the Swiss franc and yen.
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