CURRENCIES: Dollar Slips As Euro, Pound Rebound From Political-driven Losses

By Sara Sjolin and Anora Mahmudova, MarketWatch Features Dow Jones Newswires

Yen rises after renewed political fears in Europe

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The dollar weakened against most of its major rivals on Tuesday, as the pound and euro rebounded following recent losses driven by political uncertainty in Italy and the U.K.

The ICE Dollar Index was down 0.2% at 97.28, erasing gains from earlier in the session. The reversal came as the pound started to move higher, buying $1.2863 compared with $1.2837 late Monday in New York.

A pair of solid economic reports did little to boost the dollar, however. Consumer spending (http://www.marketwatch.com/story/consumers-dont-hold-back-in-april-as-spending-surges-2017-05-30)rose in April thanks to rising incomes and lower gas prices, while home price gains in March picked up speed (http://www.marketwatch.com/story/home-price-growth-accelerates-to-nearly-three-year-high-in-march-2017-05-30), accelerating to the highest rate in nearly three years, reflecting sturdy demand and lean supply.

The euro also pared losses to trade at $1.1178, up from $1.1164 on Monday.

Both the pound and euro had traded sharply lower earlier in Tuesday's session as Europe was hit with fresh concerns over Greece and Italy, as well as jitters ahead of the U.K.'s general election next week. Sterling moved sharply lower on Friday after the latest opinion polls showed the Conservative party's lead (http://www.marketwatch.com/story/pound-slides-after-poll-shows-conservatives-lead-shrinking-dollar-stumbles-2017-05-26) over Labour narrowing markedly ahead of an important June 8 parliamentary vote.

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In Italy, former prime minister and the leader of Italy's ruling centre-left Democratic Party, Matteo Renzi, has suggested the country hold its general election in September, pulling the vote forward from 2018. That has sparked fears that a euroskeptic party will make a significant showing, putting Italy on a path to leave the eurozone.

"This would bring forward a risk factor that had been previously put out to grass," said Richard Perry, analyst at Hantec Markets, in a note.

Early jitters around Greece, also fostered some anxiety in the market, on reports that finance minister Euclid Tsakalotos on Monday was suggesting that the country may opt out of getting its next bailout payment unless its creditors agree on debt relief.

However, Tsakalotos later insisted that Athens isn't considering waiving the EUR7bn loan but did emphasize that all parties need to agreed upon terms of Grecian economic reforms and a debt relief strategy.

Analysts at Brown Brothers Harriman wrote in a recent research note that it continues to look as if Athens will need a new aid package next year. However, it may not be discussed ahead of the German election in the fall.

The renewed unease about Greece and Italy helped fuel a rally in the yen . The greenback bought Yen111.04, down from Yen111.26 on Monday.

Among emerging-market currencies, the dollar strengthened against the Mexican peso and the South African rand, but Turkish lira rallied against the buck.

On Tuesday, the dollar was buying 18.6206 peso, up 0.8% from 18.4750 late Monday in New York. The peso is still up 10% against the dollar year to date.

South African rand dropped after disappointing April money and private sector credit data. The dollar bought 13.1496 rand, up 1.3% from 12.9736 late Monday.

The Turkish lira bounced up, however, with the dollar buying 3.5522, down 0.7% from 3.5766 late Monday in New York.

(END) Dow Jones Newswires

May 30, 2017 10:33 ET (14:33 GMT)