FOREX-Dollar index at five-month high as euro slips on Italian woes

Reuters

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    * Reports Italian parties seeking debt forgiveness hits euro
    * Dollar index at highest since Dec 19

 (Updates market action, adds comment)
    By Saqib Iqbal Ahmed
    NEW YORK, May 16 (Reuters) - The dollar added to recent
gains against a basket of currencies on Wednesday to touch a
five-month high, supported by relatively robust U.S. economic
data in recent days, while the euro was hit by reports that a
likely future Italian government would seek debt forgiveness
from European creditors.
    The dollar index  .DXY , which measures the greenback
against a basket of six other currencies, was up 0.19 percent at
93.393, after rising as high as 93.632, its highest since Dec.
19.
    The greenback has risen about 1.7 percent this month,
boosted by a view that the Federal Reserve will outpace most
major central banks in policy normalization.
    "There's been some improved sentiment on conditions in the
U.S. compared with other parts of the world," said Sireen
Harajli, foreign exchange strategist at Mizuho in New York.
    "Essentially, the dollar is stronger mostly because the rest
of the world is not," said Harajli.
    U.S. factory output rose in April, although new estimates of
manufacturing and overall industrial production showed less
growth in prior months than initially believed.  urn:newsml:reuters.com:*:nFOMGGEE1P
    The U.S. currency got a boost on Tuesday when strong U.S.
consumer spending numbers sent 10-year Treasury yields
 US10YT=RR  surging to a seven-year peak of 3.095 percent.
    On Wednesday, the move in the greenback was largely driven
by news out of Europe, said Alfonso Esparza, senior currency
analyst at OANDA in Toronto.
    The euro was 0.3 percent lower against the greenback at
$1.1801, its lowest since December, after reports that Italy's
anti-establishment 5-Star Movement and anti-immigrant League may
ask the European Central Bank to forgive 250 billion euros ($294
billion) of debt.  urn:newsml:reuters.com:*:nL5N1SMA1R
    The euro was 0.31 percent lower against the Swiss franc,
after dropping to a five-week low of 1.1772 francs  EURCHF= .
The Swiss franc typically attracts capital in times of
uncertainty.
    "Whenever there is euroskepticism on the rise you are
definitely going to see this type of a move in the euro," said
Esparza.
    "It's just one of the factors that reminds us again that
European growth is slowing down," he said.
    Euro zone inflation slowed in April, European statistics
agency Eurostat said on Wednesday, confirming an earlier flash
estimate and adding to the headache of European Central Bank
policy makers seeking to phase out monetary stimulus.
 urn:newsml:reuters.com:*:nL5N1SN2MW
    Against the yen, the dollar was down 0.11 percent at 110.22
yen, but still close to the highest it has been since early
February.
    Japan's economy contracted more than expected at the start
of this year, suggesting growth has peaked after the best run of
expansion in decades, unwelcome news for a government struggling
to get traction for its reflationary policies.  urn:newsml:reuters.com:*:nL3N1SM38M
    Sterling fell towards its lowest point of the year against
the dollar and was down 0.18 percent on the day,  amid fresh
worries about Britain's Brexit negotiations and relatively
modest UK wage growth.  urn:newsml:reuters.com:*:nL5N1SN2SZ

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Graphic: World FX rates in 2018    http://tmsnrt.rs/2egbfVh
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 (Reporting by Saqib Iqbal Ahmed
Editing by Nick Zieminski and Lisa Shumaker)
 ((saqib.ahmed@thomsonreuters.com; @SaqibReports; +1 646 223
6054; Reuters Messaging:
saqib.ahmed.thomsonreuters.com@reuters.net))

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