May 9, 2018 / 12:49 AM / in 6 months

FOREX-Dollar stands tall over euro, stabilises after Iran developments

* Euro hovers near 4-1/2-mth lows vs dollar

* Italian political concerns puts fresh pressure on euro

* Dlr stabilises after Trump’s decision to pull out of Iran deal

* A$ struggles near 11-mth lows in face of broad U.S. dlr strength

By Shinichi Saoshiro

TOKYO, May 9 (Reuters) - The dollar stood tall over the euro on Wednesday as concerns about Italian political turmoil hurt the common currency, with the greenback stabilising after briefly being stirred by U.S. President Donald Trump’s decision to exit a nuclear deal with Iran.

The euro was little changed at $1.1867 after sliding as low as $1.1838 overnight, its weakest since Dec. 22.

The common currency was a shade lower at 129.400 yen and on its eighth session of losses, having plumbed a six-week low of 129.240 on Tuesday.

The euro, already under pressure from weak economic indicators and widening U.S.-euro zone interest rate differentials, was also hit by political developments in Italy.

Sentiment towards the euro cooled after Italian President Sergio Mattarella’s call to bickering political parties to rally behind a “neutral government” were met with immediate opposition and raised the prospect of elections being held as early as July.

“The dollar is in a firm position to gain against its European peers as rhetoric from central banks such as the ECB and the Band of England is perceived to have turned dovish,” said Shin Kadota, senior strategist at Barclays in Tokyo.

The dollar’s advance stalled after President Trump’s announcement late on Tuesday that he is pulling the United States out of an international nuclear deal with Iran.

Overall reaction by broader markets, however, was limited.

“Crude oil prices have already recouped their losses suffered prior to the announcement. Trump’s decision was not a big surprise as it had been reported thoroughly beforehand,” said Kadota at Barclays.

The dollar was 0.05 percent higher at 109.210 yen, edging back towards a high of reached 109.350 the previous day.

Sterling traded at $1.3558 following a decline to a four-month low of $1.3485 overnight.

The pound has fallen heavily in recent weeks on expectations the BoE would not, as earlier believed, tighten monetary policy because of a relatively weak economy and as investors piled into a rallying dollar.

The Australian dollar extended its overnight slide to $0.7443.

Pressured by the dollar’s broad strength, the Aussie lost 0.85 percent overnight despite an upbeat budget from the country’s government and touched an 11-month trough of $0.7434. (Reporting by Shinichi Saoshiro Editing by Joseph Radford)

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