FOREX-Yen falls on France relief; loonie lumbered with U.S. tariff

* Dollar climbs 0.7 percent vs yen

* Euro lingers just below $1.09

* Monday's French election-driven rise was biggest since June

* Canadian dollar hit as US announces duties on Canadian lumber

* Graphic: World FX rates in 2017 http://tmsnrt.rs/2egbfVh

By Jemima Kelly

LONDON, April 25 (Reuters) - The dollar climbed as much as 0.7 percent against the yen on Tuesday, as investors regained some risk appetite after the first round of the French presidential election delivered the result they had hoped for and that pollsters had forecast.

The Canadian dollar - or "loonie", as it is known by traders - skidded to four-month lows after the United States imposed duties on Canadian softwood lumber .

Centrist candidate Emmaneul Macron won the first round of Sunday's election in France, sending the euro surging above $1.09 as investors took heart from opinion polls showing Macron would beat far-right rival Marine Le Pen - who threatens to pull France out of the euro zone - in the run-off on May 7.

The single currency stayed close to a 5 1/2-month high of $1.0940 hit the previous day, up 0.2 percent on the day by 1140 GMT at $1.0884, having finished Monday around 1.4 percent higher, its biggest one-day climb since June.

The safe-haven yen, meanwhile, which investors tend to flock to at times of risk aversion, fell around 0.7 percent to 110.55 yen to the dollar.

"(Markets are) risk-on – the French presidential election was an obvious risk, and it now looks like, barring a shock, Macron will gallop ahead and the market will have its candidate in place, and that’s another hurdle overcome this year," said BNY Mellon currency strategist Neil Mellor, in London.

The first-round outcome spared investors their worst-case scenario of Le Pen (Other OTC: PENC - news) facing off against far-left eurosceptic Jean-Luc Melenchon, who had surged in the polls in recent weeks, though he never broke into the top two.

That the pollsters - who had been criticised for failing to predict last year's votes for Brexit and Donald Trump - had accurately predicted Sunday's result bolstered confidence in their projection that Macron would win the second round, by a margin of 20 percentage points or more.

This increased confidence meant that political risk was being priced out of the euro ahead of the second round, with implied volatility - an option used to hedge against big future price swings - having fallen sharply.

"This (second round) is going to be a non-event for the market," said Commerzbank (Xetra: CBK100 - news) currency strategist Thu Lan Nguyen.

"Markets have pretty much priced out the risk of a Le Pen victory, and rightly so, because the first round of the elections has shown that the polls in France were correct ... and this increases the confidence in the polls for the second round ... It's highly likely that (Macron) is going to win."

Nguyen added that focus on the euro would now increasingly turn to monetary policy. The European Central Bank meets on Thursday, though it is not expected to announce that it is winding down - or "tapering" - its asset-purchase programme until later in the year, which should lift the euro.

Despite gains against most major currencies, the U.S. dollar index, which is heavily exposed to the euro, slipped 0.1 percent to 99.035.

For Reuters Live Markets blog on European and UK stock markets see reuters://realtime/verb=Open/url=http://emea1.apps.cp.extranet.thomsonreuters.biz/cms/?pageId=livemarkets

(Reporting by Jemima Kelly; Editing by Larry King)