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Euro rises on hopes of Italian budget compromise
THE euro rose on Wednesday, buoyed by reports that Italy may be open to reviewing its draft budget for 2019, potentially easing a confrontation with the European Union.
The European Commission is set to take the first step on Wednesday towards disciplining Italy over its draft fiscal plan. But a report that Italian Deputy Prime Minister Matteo Salvini may be open to reviewing the government's 2019 budget helped support Italian government bond markets and the euro on Wednesday. The newspaper La Stampa said Mr Salvini was ready to reduce the planned spending on a citizen's income and the unwinding of a previous pension reform.
At 0830 GMT, the euro traded up 0.3 per cent at US$1.14. The single currency has risen in six out of the last seven sessions. "The potential for a further tussle between Rome and Brussels can have an impact on the overall eurozone economic growth, which will keep the euro under pressure," said Michael McCarthy, chief markets strategist at CMC Markets.
The euro's strength weighed on the dollar index, a measure of performance against six major currencies, which fell 0.2 per cent to 96.621. The index gained 0.65 per cent the day before. The dollar has been supported by investors seeking out the safe haven currency on mounting concern about global growth and a US-China trade war.
With another rout in global equities on Tuesday, risk-averse traders sought shelter in the dollar, which climbed from a two-week low hit earlier on Tuesday.
The dollar has been under pressure this week partly from comments by Federal Reserve officials expressing concern about a potential global slowdown. Those comments led some investors to bet that the rate-hike cycle was near its end.
The Japanese yen fell 0.15 per cent to trade at 112.86.
Despite its safe-haven status, the yen's strength has been muted. Analysts suspect this is because Japanese investors have kept their money in US and foreign markets, rather than bring it home.
The British pound traded up 0.2 per cent at US$1.2808 after losing 0.5 per cent against the dollar on Tuesday. The pound is expected to trade sideways until the market gets more clarity on progress in the Brexit deal.
The Canadian dollar dropped to a four-month low versus the dollar to trade at 1.3305 as the price of crude fell to its lowest level in more than a year. Canada is one of the world's top oil exporters. REUTERS