FOREX-Dollar stands tall as euro plumbs 5-mth low on Italian political uncertainty


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    * Dollar lifted as euro slides on Italian political
    * Dollar index near fresh 5-month high brushed overnight
    * Aussie, loonie, kiwi supported by ebb in risk aversion

    By Shinichi Saoshiro
    TOKYO, May 17 (Reuters) - The dollar stood tall against a
basket of currencies on Thursday, as the euro retreated to a
five-month low on concerns the political developments in Italy
could cause wider disruptions in the common currency bloc.
    The euro was 0.05 percent higher at $1.1813  EUR=  after
sliding overnight to $1.1763, its lowest since Dec. 18.
    Political uncertainty in Italy, where populist parties have
jostled to forge a common platform in a bid to lead the next
government, have been a major drag on the euro.
    The common currency slid to the five-month low on reports
that Italy's anti-establishment 5-Star Movement and
anti-immigrant League may ask the European Central Bank to
forgive 250 billion euros of debt as the parties worked to draft
a coalition programme.*:nL5N1SMA1R
    "The euro looks on track for further losses as market
participants still appear to have more long positions on the
euro to liquidate," said Yukio Ishizuki, senior currency
strategist at Daiwa Securities in Tokyo.
    "While the situation in Italy is a concern for currencies,
the 5-Star Movement sees Britain struggle with its EU exit plan
and is unlikely to pursue a similar agenda. The political
fallout from Italy could be relatively well contained as a
     For now the euro also faced pressure from a bullish dollar,
which has been boosted this week as U.S. benchmark yields broke
above the 3 percent threshold to a seven-year high.
    The dollar index against a basket of six major currencies
was a shade lower at 93.298  .DXY  after rising on Wednesday to
93.632, its highest since Dec. 19.
    The dollar was steady at 110.380 yen  JPY= . A rise above
110.450 would take the greenback to its highest since Feb. 2
versus its Japanese peer.
    The Australian dollar was little changed at $0.7514  AUD=D4 
after gaining 0.6 percent overnight, buoyed by a rise in prices
of commodities such as copper.
    Other commodity-linked currencies like the Canadian dollar
also advanced as equities bounced back overnight from the
previous day's losses caused by the spike in U.S. yields.
    The loonie stood firm at C$1.2785 per dollar  CAD=D4  after
gaining 0.67 percent on Wednesday. The commodity-linked currency
is sensitive to movements in equity markets, which are seen as a
key indicator of the prospects for global growth.  CAD/ 
    The New Zealand dollar traded at $0.6899  NZD=D4  after
managing to pull back the previous day from a five-month trough
of $0.6851.

 (Editing by Sam Holmes)
 ((; Reuters Messaging:

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