Dollar gains against euro on Deutsche Bank fears, falls vs Mexican peso

NEW YORK (Reuters) - The U.S. dollar rose against the euro on Tuesday after concerns surrounding Deutsche Bank caused general unease over Europe’s banking sector, while the Mexican peso rallied on short-covering after the first U.S. presidential debate.

Euro, Hong Kong dollar, U.S. dollar, Japanese yen, British pound and Chinese 100-yuan banknotes are seen in a picture illustration shot January 21, 2016. REUTERS/Jason Lee/Illustration/File Photo

Deutsche Bank DBKGn.DE shares hit a record low on Tuesday a day after Germany's biggest lender said it had no need for German government help with a $14 billion U.S. demand to settle claims it missold mortgage-backed securities.

The euro was last down 0.29 percent at $1.1220, easing from an 11-day high of $1.1278 touched on Monday.

Concerns that capital levels at European banks in general need to be strengthened contributed to the euro’s weakness, said Marvin Loh, senior global markets strategist at BNY Mellon in Boston.

The perception among market participants that Democratic presidential candidate Hillary Clinton's performance in the first U.S. presidential debate was superior to that of Republican candidate Donald Trump boosted the peso MXN=.

The currency had touched a record low of 19.92 pesos against the dollar on Monday on concerns that a Trump victory would threaten Mexico’s exports to the United States, its single biggest market.

The outcome of the debate led investors to cover peso short positions, said Richard Franulovich, senior currency strategist at Westpac Banking Corporation in New York.

Data from the U.S. Commodity Futures Trading Commission on Friday showed speculators had recently ramped up their bearish bets against the Mexican currency.

The dollar was last down 2.2 percent against the peso at 19.4310 pesos after hitting an 11-day low of 19.4048 pesos in early trading. The dollar was on track for its biggest daily percentage drop against the peso since mid-February.

Relief that Clinton’s performance was viewed as superior also likely helped the dollar gain against the euro given uncertainty surrounding a potential Trump presidency, Franulovich of Westpac said.

Markets have tended to see Clinton as the candidate of the status quo, while few are sure what a Trump presidency might mean for U.S. foreign policy, international trade deals or the domestic economy.

“You might argue that currencies like the yen and the euro had a defensive quality about them that were benefiting from Trump risk,” he said.

The dollar was last flat against the yen at 100.32 yen JPY= after falling 0.7 percent against the Japanese currency on Monday. The dollar index .DXY, which measures the greenback against a basket of six major currencies, was last up 0.15 percent at 95.443.

Reporting by Sam Forgione; Editing by Meredith Mazzilli