November 13, 2018 / 4:26 PM / 7 months ago

FOREX-Euro, sterling gain on hopes for Brexit deal

    * Dollar index retreats from 16-month peak
    * Sterling hits 6-1/2 peak versus euro on hopes for Brexit
    * Graphic: World FX rates in 2018

 (Updates market action, changes dateline, previous LONDON)
    By Richard Leong
    NEW YORK, Nov 13 (Reuters) - The euro and sterling rose on
Tuesday following comments from a British official that signaled
Britain and the European Union are close to clinching an
agreement for the nation to leave the economic bloc as
negotiators seek to avoid missing a deadline.
    A stronger euro and sterling spurred profit-taking in the
dollar, which reached a 16-month peak against a basket of
currencies on Monday. 
    Uncertainty over the terms of Brexit has bogged down both
currencies as a deal is required to keep business open between
the EU and the world's fifth-biggest economy.
    The euro's gain was limited by concerns about Italy's budget
proposals and downbeat German investor sentiment data, traders
    "News that the EU and U.K. nearly have a Brexit deal in
place is injecting short-term flows into the common currency,"
said Viash Sreemuntoo, corporate trader at XE in Toronto. 
    Encouraging comments on Brexit negotiations lifted the pound
to a 6-1/2 month peak versus the euro. Sterling reversed much of
Monday's loss against the dollar.
    "We are almost within touching distance now," British
Cabinet Office Minister David Lidington, who is Prime Minister
Theresa May's de facto deputy, told BBC radio.
    At 10:49 a.m. (1549 GMT), the euro was up 0.52 percent at
$1.12770. It had fallen to $1.1216, the lowest since June 2017. 
    The common currency was down 0.29 percent at 87.05 pence
after touching 86.82 pence earlier Tuesday, which was the lowest
since April 26.
    Sterling was up 0.89 percent at $1.2964 following a nearly 1
percent drop on Monday.
    An index that tracks the dollar versus the euro, sterling,
yen and three other currencies was 0.28 percent lower at
97.269, easing below a 16-month high of 97.693 reached on
    In contrast to the latest news on Brexit, Italy's budget
proposals remain a drag on the euro.
    Tuesday is the deadline for Italy, the euro zone's third-
biggest economy, to resubmit its budget plans to the EU after a
showdown between Rome and Brussels over the government's 2019
spending plans.
    The European Commission rejected Italy's draft fiscal plan
last month and has threatened to impose penalties if it is not
revised to conform with EU regulations - something Rome has
indicated it is unwilling to do. 
    The International Monetary Fund on Tuesday warned the
government's stimulus plan would leave Italy vulnerable.

    The tension between Rome and Brussels has raised fears about
Italy's membership in the euro zone.
    "Italy is the big test case for the euro," said Joachim
Fels, global economic advisor at PIMCO at the Reuters Global
Investment Outlook Summit in New York. "That risk is not going
away anytime soon."
    Currency bid prices at 10:49AM (1549 GMT)
 Description      RIC         Last           U.S. Close  Pct Change     YTD Pct     High Bid    Low Bid
                                              Previous                   Change                 
 Euro/Dollar      EUR=        $1.1277        $1.1217     +0.53%         -5.99%      +1.1281     +1.1217
 Dollar/Yen       JPY=        113.8400       113.8300    +0.01%         +1.04%      +114.1400   +113.5900
 Euro/Yen         EURJPY=     128.39         127.69      +0.55%         -5.02%      +128.5000   +127.5000
 Dollar/Swiss     CHF=        1.0085         1.0107      -0.22%         +3.51%      +1.0128     +1.0085
 Sterling/Dollar  GBP=        1.2952         1.2847      +0.82%         -4.14%      +1.2979     +1.2842
 Dollar/Canadian  CAD=        1.3246         1.3245      +0.01%         +5.32%      +1.3259     +1.3215
 Australian/Doll  AUD=        0.7208         0.7172      +0.50%         -7.60%      +0.7218     +0.7165
 Euro/Swiss       EURCHF=     1.1376         1.1339      +0.33%         -2.68%      +1.1382     +1.1337
 Euro/Sterling    EURGBP=     0.8704         0.8729      -0.29%         -2.02%      +0.8742     +0.8682
 NZ Dollar/Dolar  NZD=        0.6754         0.6708      +0.69%         -4.69%      +0.6756     +0.6709
 Dollar/Norway    NOK=        8.4829         8.5169      -0.40%         +3.36%      +8.5252     +8.4743
 Euro/Norway      EURNOK=     9.5686         9.5561      +0.13%         -2.84%      +9.5810     +9.5476
 Dollar/Sweden    SEK=        9.0616         9.1472      -0.44%         +10.48%     +9.1543     +9.0543
 Euro/Sweden      EURSEK=     10.2183        10.2630     -0.44%         +3.85%      +10.2810    +10.2110

 (Additional reporting by Saikat Chatterjee in LONDON
Editing by Andrea Ricci)
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