- Euro hits fresh 2018 lows on worries about Italy, economy
- U.S. inflation data key to further dollar gains
- Sterling dips before BOE meeting on Thursday
- Commodity-linked, emerging market currencies slide
(Updates market action, adds quote)
The U.S. dollar rose to its highest level this year against a basket of currencies on Tuesday due to worries about political turmoil in Italy before paring some gains on a U.S. decision to withdraw from the international nuclear deal with Iran.
The dollar's run-up stalled ahead of President Donald Trump's announcement that the United States was pulling out of the 2015 deal, which eased economic sanctions in exchange for Tehran limiting its nuclear program. Trump said he would reimpose the sanctions.
Commodity-linked and emerging market currencies fell on worries that a possible U.S. withdrawal would hit risk appetite in financial markets, holding their losses after Trump's announcement.
Traders, however, downplayed the market significance of the move.
"This was probably going to happen. Overall it doesn’t change the story on dollar strength with the Fed rate hikes and a hiccup in Europe," said John Doyle, vice president of dealing and trading at Tempus in Washington.
The index that tracks the greenback versus the euro, yen, sterling and six other currencies .DXY earlier on Tuesday hit 93.280, its highest level since December. It was last up 0.4 percent at 93.100 in late U.S. trading.
The euro EUR= declined 0.5 percent to $1.1860 after hitting $1.1836 earlier, its weakest level since late December, Reuters data showed.
The single currency EURJPY= fell over 0.5 percent to 129.32 yen.
On Monday, Italy's two largest parties resisted President Sergio Mattarella's call to rally behind a "neutral government."
The yen firmed against the dollar at 109.06 yen JPY= as some traders favored the currency of the world's largest saver in the wake of Trump's Iran announcement.
The Swiss franc, another traditional safe-haven currency, was steady against the dollar CHF= at 1.0019 franc, and was 0.6 percent stronger at 1.1883 franc EURCHF= .
Expectations for more U.S. interest rate hikes from the Federal Reserve have underpinned the dollar's rebound despite soft U.S. domestic data, analysts said.
Thursday's U.S. consumer price index for April should show whether inflation is approaching the Fed's 2 percent goal.
"We have to wait for the inflation data which would be telling for the dollar," said Joe Manimbo, senior market analyst at Western Union Business Solutions in Washington.
The pound declined to $1.3541 GBP=D3 , its lowest level since Jan. 11. Bank of England policymakers are expected to leave interest rates unchanged when they meet on Thursday.
Among commodity-linked currencies, the Australian dollar AUD=D4 fell 0.9 percent to $0.74485 after touching an 11-month low.
======================================================== Currency bid prices at 3:21PM (1921 GMT)Description RIC Last U.S. Close Pct Change YTD Pct High Bid Low Bid Previous Change Session Euro/Dollar EUR= $1.1861 $1.1920 -0.49% +0.00% +1.1939 +1.1839 Dollar/Yen JPY= 109.0500 109.0800 -0.03% +0.00% +109.3500 +108.8400 Euro/Yen EURJPY= 129.34 130.05 -0.55% +0.00% +130.1200 +129.2400 Dollar/Swiss CHF= 1.0019 1.0024 -0.05% +0.00% +1.0045 +1.0004 Sterling/Dollar GBP= 1.3540 1.3555 -0.11% +0.00% +1.3591 +1.3485 Dollar/Canadian CAD= 1.2957 1.2879 +0.61% +0.00% +1.2997 +1.2875 Australian/Doll AUD= 0.7450 0.7516 -0.88% +0.00% +0.7528 +0.7434 arEuro/Swiss EURCHF= 1.1885 1.1952 -0.56% +0.00% +1.1962 +1.1867 Euro/Sterling EURGBP= 0.8754 0.8791 -0.42% +0.00% +0.8810 +0.8756 NZ Dollar/Dolar NZD= 0.6965 0.7015 -0.71% +0.00% +0.7030 +0.6954 Dollar/Norway NOK= 8.1442 8.0688 +0.93% +0.00% +8.1632 +8.0536 Euro/Norway EURNOK= 9.6633 9.6224 +0.43% +0.00% +9.6777 +9.6090 Dollar/Sweden SEK= 8.8264 8.8340 -0.63% +0.00% +8.8535 +8.7915 Euro/Sweden EURSEK= 10.4680 10.5340 -0.63% +0.00% +10.5485 +10.4408 <^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^ Last man standing http//reut.rs/2rifa8mWorld FX rates in 2018 http://tmsnrt.rs/2egbfVh
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