* Perceived safe-haven yen benefits from risk-averse
* Italian bonds drop after Renzi election remarks raise
* Pound pressured as latest polls show ruling party lead
* U.S., UK markets were closed for holidays on Monday
TOKYO, May 30 The dollar firmed against a basket
of currencies on Tuesday as the euro and sterling were pressured
by political uncertainties in the UK and eurozone, even as it
surrendered ground against the perceived safe-haven yen.
The dollar index, which tracks the greenback against a
basket of six rival currencies, rose 0.2 percent to 97.659
, pulling further away from a 6-1/2-month low of 96.797
plumbed last week.
U.S. and UK markets were closed for holidays on Monday,
giving investors fewer directional clues to follow.
British Prime Minister Theresa May's lead over the
opposition Labour Party dropped to 6 percentage points in a poll
published on Tuesday, the latest to show a shrinking lead for
the ruling Conservatives ahead of June 8 elections since the
Manchester terrorist attack.
Sterling slipped 0.2 percent to $1.2816, moving back
toward a three-week low of $1.2775 touched on Friday, while the
euro dropped 0.3 percent to 1.1128.
The euro was on the defensive as worries about Greece's
financial situation also re-emerged, after its finance minister
said on Monday that its creditors need to reach a deal on debt
relief measures at the next meeting of euro zone finance
ministers in June to help the country return to bond markets. A
German press report said Athens may opt out of its next bailout
payment if creditors cannot strike a deal.
"The lenders will meet next month, and people expect them to
reach an agreement, because it always happens like this, with
fears that they won't," said Kaneo Ogino, director at foreign
exchange research firm Global-info Co in Tokyo.
"But in the meantime, worries about Greece and Italy
provided a good excuse for people who want to reduce their long
positions in the euro," he said, after the European currency
rose to a 6-1/2-month high of $1.1268 last week.
European Central Bank President Mario Draghi failed to give
the euro much help on Monday, citing improved growth but
repeated the need for "substantial" stimulus as inflation
Former Italian Prime Minister Matteo Renzi said on Sunday
that it makes sense "from a European perspective" for Italy's
next election be held at the same time as Germany's, scheduled
for September. His comments led to a selloff in Italian
government debt on Monday.
"The euro is under downward pressure following Renzi's
comment that he would favour snap elections," as well as
proportional representation that could lead to a hung
parliament, said Masafumi Yamamoto, chief forex strategist at
"It seems the market has begun to realize there's political
uncertainty in Italy," he said. "The dollar/yen, meanwhile, is
waiting for clarification on balance sheet reduction by the
Markets are mostly pricing in the possibility that the U.S.
central bank will raise interest rates by a quarter point to
1.00-1.25 percent at its June 13-14 policy meeting, with
attention turning to clues on the timing of when the Federal
Reserve intends to begin paring its $4.5 trillion balance sheet.
The dollar slipped 0.4 percent against its Japanese
counterpart to 110.85 yen, but remained mired in its
recent narrow range between last week's high of 112.13 and May
18's low of 110.24.
"Already a rate hike is discounted in the market, so there
needs to be some additional factors in order for the dollar to
resume testing the upside," said Koji Fukaya, president at FPG
Securities in Tokyo.
"But there are uncertainties over the Trump administration,
and if fiscal policy will expand or not, or if the economy will
accelerate," he said. "The dollar's upside is limited, so it's
testing the downside.
U.S. President Donald Trump continued to defend his
administration against reports that his son-in-law tried to set
up a secret channel of communication with Moscow before Trump
took office. Trump's recent firing of FBI Director James Comey,
who had been investigating possible links between the campaign
team and Russia, raised anxiety about promised fiscal stimulus
steps and tax reform.
The euro tumbled 0.7 percent to 123.82 yen after
falling as low as 123.24, its weakest since May 18.
Data released early in the session showed labour demand in
Japan rose to its strongest in more than 40 years while the
unemployment rate held steady at a two-decade low last month,
offering hope that a tight labour market will eventually spark a
turnaround in weak consumer spending and inflation.
(Reporting by Tokyo markets team; Editing by Shri Navaratnam)