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Dollar Rising Against Euro Due To Uncertainty In Italy

Dollar Rising Against Euro Due To Uncertainty In Italy
2/25/2013 12:21 PM ET

The dollar has had a sharp reversal against the Euro at the beginning of the new trading week, due to the uncertain result of the Italian election. The U.S. currency is also up against the pound sterling, after Moody's reduced its rating on the U.K. However, the buck has given back its early gains against the Japanese Yen and is now back near unchanged for the day.

Early exit polls from the Italian elections showed the center-left, led by Pier Luigi Bersani, was in the lead. Later in the day updated results showed resurgence in strength for Silvio Berlusconi. The result of the election remains uncertain, as votes continue to be counted.

French and German finance ministers have urged the Troika and Cyprus to expedite the talks on a bailout deal for the troubled euro area nation.

In a joint statement released on Monday, French Finance Minister Pierre Moscovici and his German counterpart Wolfgang Schaeuble welcomed the result of the Cypriot election. They expressed hope that the new government would 'quickly continue' with the bailout negotiations.

The French government should honor its commitment to reduce the country's structural deficit this year, and take steps to minimize any overshoot of its budget deficit target, European Central Bank (ECB) executive council member Benoit Coeure said Monday.

In an interview to a French newspaper, he urged the French authorities to take appropriate measures to convince its peers in the region that they are committed to keeping to the European Union's deficit regulations.

France needs an extra EUR 6 billion next year to make up for a shortfall in government finances as the temporary tax hikes will end this year, Budget Minister Jerome Cahuzac said in a radio interview on Monday.

The current budgetary situation of the country does not allow the government to ignore such a shortfall in revenue, the minister said told Europe 1 radio. To ensure fiscal stability, it is essential to find new revenue, he added.

The Greek economy will likely remain in recession this year and unemployment will continue to rise before fiscal conditions start improving next year, and the government should takes steps to expedite structural reforms to combat recession, Bank of Greece Chief George Provopoulos said Monday.

Addressing the bank's shareholders meeting, Provopoulos cautioned that though the eventuality of Greece exiting the Eurozone has been reduced significantly, and confidence is gradually being restored there is no room for complacency.

The central bank forecasts that the economy would shrink by 4.5 percent this year, which is slightly more than the 4.4 percent contraction the European Commission has predicted.

The dollar dropped to over a 2-session low of $1.3318 against the Euro on Monday, but has since bounced back to around $1.3185.

The U.K. lost its prized AAA bond ratings for the first time since 1978 in the face of sluggish economic growth that is raising challenges to fiscal consolidation.

Moody's Investors Service downgraded the nation's sovereign rating by one notch to Aa1 late Friday, while assigning 'stable' outlook. In a related action, the rating agency also lowered the ratings of the Bank of England to Aa1 from Aaa.

The latest action was taken after a warning last February, and adds more pressure on Chancellor George Osborne to contain the huge public debt. He is set to present the budget on March 20.

The greenback jumped sharply against the pound sterling at the start of the new trading week and has continued to trade around the $1.5100 level.

U.K. mortgage approvals declined unexpectedly to 32,288 in January from 33,440 in the prior month, the British Bankers' Association said Monday. It was forecast to rise to 34,000.

The Japanese government is likely to nominate the Asian Development Bank President Haruhiko Kuroda as the next Bank of Japan governor, Japanese media reports said Saturday citing sources close to the matter.

News agency Kyodo and the Japanese daily The Asahi Shimbun, both of which carried the story, described Kuroda as an advocate of aggressive monetary easing, in line with Prime Minister Shinzo Abe's efforts to tackle deflation and revive the economy.

The buck jumped to an early high of Y94.600 against the Japanese Yen on Monday, but has since pulled back to around Y93.450.

An index measuring corporate service prices in January was down 0.2 percent on year in January, the Bank of Japan said on Monday, standing at 95.4. That matched forecasts following the 0.4 percent contraction in December.

On a monthly basis, corporate service prices were down 0.4 percent after rising 0.2 percent in the previous month.

by RTT Staff Writer

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