- Euro drops on Italian concerns
- Hawkish Fed keeps bid for greenback
(New throughout, updates prices, market activity and comments to U.S. market open, new byline, changes dateline, previous LONDON)
The euro fell to a six-week low on Tuesday after a senior lawmaker in one of Italy's ruling parties said most of the country's problems would be resolved if it readopted a national currency.
Italy's coalition proposed a budget with a higher-than-expected deficit target, exacerbating tensions with other euro zone leaders and worrying investors who want Rome to bring its debt under control.
The lawmaker, Claudio Borghi, later rowed back on the comments, while Prime Minister Giuseppe Conte said the euro was "unrenounceable".
The single currency EUR= dropped as low as $1.1505, its weakest since Aug. 21, before retracing to $1.1537, down 0.34 percent on the day.
"We are dealing with a war of words, with the euro on one side and Italy on the other ... There's a lot of headline risk about," Credit Agricole head of G10 FX Strategy Valentin Marinov said.
Most of the common currency's losses came after Borghi, the economic head of the right-wing League party, said Italy would enjoy more favorable economic conditions outside the euro zone.
The euro has strong technical support at the $1.15 area, which is the 50 percent retracement level of its rally from August to September, said Win Thin, global head of currency strategy at Brown Brothers Harriman in New York.
A break below this level could mean further euro weakness to the $1.13 area, Thin said.
The Australian dollar AUD= , often viewed as a barometer of risk appetite, fell 0.58 percent to $0.7181 as markets worldwide were spooked by the euro zone concerns. The Reserve Bank of Australia earlier held interest rates at 1.5 percent, a widely expected decision.
As the euro's weakened, the U.S. dollar kept pushing higher even though investor positioning in the greenback looks stretched.
“The main driver is the U.S. Fed, they signaled they are comfortable with the U.S. economy to continue hiking rates,” said Thin.
The U.S. dollar has strengthened against the euro since Wednesday, when the Federal Reserve raised interest rates as expected and said it foresees another rate hike in December, three more next year and one in 2020.
The dollar index .DXY rose 0.28 percent to 95.563, after getting as high as 95.744, the highest since August 21.
======================================================== Currency bid prices at 9:49AM (1349 GMT)Description RIC Last U.S. Close Pct Change YTD Pct High Bid Low Bid Previous Change Session Euro/Dollar EUR= $1.1537 $1.1576 -0.34% -3.83% +1.1580 +1.1506 Dollar/Yen JPY= 113.7500 113.9100 -0.14% +0.96% +114.0100 +113.6200 Euro/Yen EURJPY= 131.24 131.88 -0.49% -2.91% +131.9900 +130.7300 Dollar/Swiss CHF= 0.9837 0.9837 +0.00% +0.98% +0.9853 +0.9830 Sterling/Dollar GBP= 1.2964 1.3041 -0.59% -4.06% +1.3055 +1.2942 Dollar/Canadian CAD= 1.2816 1.2810 +0.05% +1.90% +1.2839 +1.2799 Australian/Doll AUD= 0.7181 0.7223 -0.58% -7.95% +0.7237 +0.7163 arEuro/Swiss EURCHF= 1.1351 1.1389 -0.33% -2.89% +1.1394 +1.1314 Euro/Sterling EURGBP= 0.8899 0.8879 +0.23% +0.18% +0.8908 +0.8867 NZ Dollar/Dolar NZD= 0.6588 0.6612 -0.36% -7.03% +0.6614 +0.6576 Dollar/Norway NOK= 8.1776 8.1482 +0.36% -0.36% +8.2128 +8.1500 Euro/Norway EURNOK= 9.4372 9.4366 +0.01% -4.18% +9.4526 +9.4325 Dollar/Sweden SEK= 8.9985 8.9442 +0.26% +9.72% +9.0275 +8.9439 Euro/Sweden EURSEK= 10.3839 10.3574 +0.26% +5.54% +10.3912 +10.3540
