“The impact is limited as the German election results is more of a domestic political story for now rather than a regional European trend and the euro will be more sensitive to any shift in direction from the European Central Bank policy,” said Viraj Patel, an FX strategist at ING Bank in London.
The euro EUR=EBS slipped 0.4 percent to $1.1912 against the dollar on Monday but was higher against the Swiss franc EURCHF= and was broadly flat against the Japanese yen EURJPY=.
Merkel did win a fourth term in office on Sunday but will have to build an uneasy coalition to form a government after her conservatives hemorrhaged support in the face of a surge by the anti-immigration Alternative for Germany (AfD).
Despite winning the most votes, Merkel’s bloc slumped to its worst result since 1949 and her current Social Democrat coalition partners said they would go into opposition after tumbling to 20.7 percent in projections, a post-war low.
The German election results are not a game changer for markets with the outcome likely positive for German equities, Michael Strobaek, global chief investment officer at Credit Suisse said in a note to clients.
Elsewhere, the dollar gained against a broad basket of currencies .DXY, rising 0.15 percent on the day as investors reduced some short bets against the greenback.
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