* Euro poised to notch worst loss vs dollar since May 2012
* Concerns about Italian political deadlock weigh on euro
* IMF to cut growth forecasts if U.S. spending cuts emerge
* Japan nominates Kuroda as next BoJ chief, as expected
By Daniel Bases and Julie Haviv
NEW YORK, Feb 28 Stalemate in the United States
over automatic government spending cuts due to take effect on
March 1 and an inconclusive election in Italy undermined the
euro on Thursday, sending it back toward seven-week lows against
the U.S. dollar.
The greenback also found support from upbeat economic data
showing growth in the fourth quarter of last year, albeit
miniscule, after a preliminary report of contraction. Consumer
spending rose while weekly claims for jobless benefits declined,
contributing to some of the dollar's strength.
In Washington, the hardening positions of U.S. President
Barack Obama and opposition Republicans with just hours to go
before $85 billion in across-the-board spending cuts kick in
spurred investors - perhaps ironically - to seek the safety of
the U.S. dollar.
"Given past experience, many investors have clung to hopes
that Washington might strike an 11th hour deal to avoid the big
spending cuts or cobble together a plan in the coming weeks to
blunt the impact on the economy," Joe Manimbo, senior market
analyst at Western Union Business Solutions in Washington, D.C.
The International Monetary Fund said it will likely cut its
growth forecasts for the United States and the global economy if
the spending cuts do take effect. It warned that the United
States' biggest trading partners would be hardest hit.
In Italy, a protest vote has produced the worst possible
result for its stagnant and recession-hit economy as it is
expected that any coalition government formed will be
short-lived. That will not expunge deep concerns about sustained
instability in the euro zone's third-largest economy possibly
reigniting Europe's debt crisis.
Due to the size of the Italian economy, the European Central
Bank may offer support should the debt crisis take a turn for
Month-end flows made for choppy price action, with the euro
poised to end February about 3.8 percent lower against the
dollar, which would mark its worst monthly performance since
The euro last traded at $1.3062, down 0.57 percent on
the day, but still above the session low $1.3054.
The euro held above a near eight-week low of $1.3017 hit on
Tuesday after the inconclusive Italian elections. Options
barriers ahead of $1.3160 could limit any gains.
"I think there is interest in selling euro on concerns about
growth and Italy," said Alvise Marino, currency strategist at
Credit Suisse in New York. Marino is less convinced of the
dominance of safe-haven flows for the greenback given the narrow
range of the moves.
Some market players expect the euro to remain rangebound
over the next few weeks while awaiting more clarity on Italy.
Strong support was seen around the 2013 low of $1.2997, touched
in early January.
U.S. DATA SHOWS IMPROVEMENT
The dollar briefly reacted to data showing anemic U.S.
economic growth in the fourth quarter, although a slightly
better performance in exports and fewer imports led the
government to scratch an earlier estimate that the economy had
The government also reported a drop in new U.S. claims for
unemployment benefits last week, adding to a string of data that
suggests the economy improved early this year.
Against the Japanese yen, the dollar last traded at 92.61
yen, up 0.4 percent on the day, according to Reuters
The euro last traded at 120.86 yen, or down 0.22
percent on the day, but above a five-week low of 118.74 yen set
The yen showed little reaction after Japan's prime minister,
as expected, nominated Haruhiko Kuroda, president of the Asian
Development Bank, as governor of the Bank of Japan and academic
Kikuo Iwata as one of the bank's two deputy governors.
Japan's parliament is expected to approve the nominations,
clearing the way for the central bank to unveil fresh easing
steps in April, which could add to selling pressure on the yen.
The greenback is poised to end February about 1 percent
higher against the yen, notching its fifth straight monthly
The dollar has risen steeply against the yen since November,
hitting a 33-month high of 94.76 yen on Monday, according to