Euro edges up as US dollar surge loses steam

London

THE euro rose off a six-month low on Thursday as the US dollar faltered but concerns over an economic slowdown in Europe and political risks in Italy continued to act as a brake.

The euro is set to be down for a sixth consecutive week against the US dollar - the longest weekly losing streak since January 2015 - hobbled by the surging US currency and worries over a deepening economic slowdown in the currency bloc.

The single currency rose to US$1.1746, off the low of US$1.1676 hit on Wednesday, and was heading for its biggest daily gain in two weeks.

But that was largely because the recent US dollar rally lost some momentum following dovish-looking minutes of the Federal Reserve's last policy meeting and the threat by US President Donald Trump to impose new tariffs on imported cars.

The euro's gains were also capped by economic and political worries in Europe. The leader of the far-right League, a partner in Italy's planned coalition government, insisted on Thursday that eurosceptic economist Paolo Savona should be named economy minister.

The euro has unwound all of its rally against the Swiss franc since the Italian elections as the prospect of a spendthrift coalition government taking shape in Rome unnerves investors. It fell to near three-month lows against the franc on Wednesday as fresh data indicated a slowdown in European business activity. The euro was soft against the yen, hitting a nine-month low of 128.01 yen.

The European Central Bank's chief economist said on Thursday there are "clouds" on the horizon, including plans by Italy's would-be government to loosen fiscal policy and roll back a pension reform, and international trade tension.

The US dollar's fall appeared to accelerate after the minutes of the Fed meeting. While most policymakers thought it likely another US interest rate increase would be warranted the minutes showed the Fed would tolerate inflation rising above its goal for a time.

Mr Trump opened a front in the trade war on Wednesday by considering new tariffs, this time on cars, just days after Washington agreed with Beijing to put "on hold" its plan to impose tariffs on US$150 billion worth Chinese goods.

Against the yen, the US dollar shed 0.7 per cent to 109.3 yen, a day after it experienced its biggest fall in nearly three months.

The safe-haven Swiss franc also ticked up 0.2 per cent to 0.9914 franc to the US dollar. REUTERS