* Pro-EU parties hold on to majority despite populist rise
* Euro off two-year low, yen slips with Trump in Tokyo
* U.S. and UK markets shut for holiday, trading subdued
* Graphic: World FX rates in 2019 - http://tmsnrt.rs/2egbfVh
(Adds detail, updates with latest prices)
By Tommy Wilkes
LONDON, May 27 (Reuters) - The euro struggled to cling on to
gains on Monday as investor relief at limited success for
eurosceptic parties in European parliamentary elections was
offset by a decline in the share of seats held by the biggest
blocs.
Centre-right and centre-left blocs lost their shared
majority, but surges by the Greens and liberals meant parties
committed to strengthening the union held on to two thirds of
seats, official projections showed. The single currency initially rose as high as $1.1215, off
two-year lows of $1.1105 touched on Thursday.
But it later fell to stand 0.1% down at $1.1197 EUR=EBS in
subdued trading because of market holidays in London and New
York.
"If anything, it was positive that the populists didn't gain
more than they did," said Christin Tuxen, an FX analyst at
Danske Bank.
The euro did hold on to gains against the Swiss franc and
was last up 0.3% at 1.1256 francs EURCHF=EBS .
The election results dented the hopes of anti-immigration,
anti-Brussels parties, including those in France and Italy,
despite topping the polls in their respective countries.
Tuxen said the election, normally of limited interest to
global markets, was the first of a series of meaningful
political events in Europe this year, though signs of slowing
economic momentum mean that monetary policy still matters more.
"What is really going on in the FX market is we are waiting
to hear if there will be a Fed (U.S. Federal Reserve) reaction
to the deteriorating cyclical outlook," Tuxen said, pointing to
rising expectations of a cut to U.S. interest rates later this
year.
The dollar index rose 0.1% to 97.705 .DXY .
The U.S. currency rose 0.1% against the Japanese yen to
109.45 yen JPY= , buoyed by bargain-hunting Japanese investors.
Despite Monday's gains, the dollar is not far from the
three-month low of 109.02 yen touched two weeks ago amid
escalating tensions between Washington and Beijing over trade
and technology.
The dollar's strength was also capped after U.S. President
Donald Trump used his Tokyo visit to press Japan to take
measures to reduce its trade surplus with the United States.
The pound slipped as low as $1.2673 GBP=D3 , retreating
after early gains. The British currency bounced on Friday after
Prime Minister Theresa May set out a date for her departure, but
sterling remains near 4-1/2 month lows.
The prospect of a "no-deal" Brexit is fast becoming the
defining issue of the race to succeed May, keeping the pound
under pressure. "Sentiment towards the pound is still negative," said ACLS
Global analyst Marshall Gittler, citing option market data
signals that people were buying insurance against a further fall
in the pound and positioning data showing a big increase in
short positions against the British currency.
China's onshore CNY=CFXS and offshore CNH=EBS yuan
strengthened to a 1-1/2 week high, buoyed by a senior official's
warning not to bet against the currency.
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Euro vs U.S. dollar https://tmsnrt.rs/2W3k0aS
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(Editing by John Stonestreet and David Goodman
)