May 8, 2018 / 3:10 PM / 6 months ago

FOREX-Dollar sets 2018 highs on jitters over Iran, Italy

    * Euro hits fresh 2018 lows on worries about Italy, economy
    * U.S. inflation data hold key to further dollar gains
    * Sterling slumps before BOE meeting on Thursday
    * Commodity-linked, emerging market currencies slide

 (Updates market action, changes dateline, previous LONDON)
    By Richard Leong
    NEW YORK, May 8 (Reuters) - The dollar advanced on Tuesday
to its highest level of 2018 against a basket of currencies on
safe-haven buying, as investors worried about the fate of the
Iran nuclear deal and political turmoil in Italy.
    Recent data showing Europe's economic growth was slowing
caused traders to cut bullish bets on euro and to scale back
their outlook for European interest rate hikes in 2019.
    "The top focus point today is with Iran. There's also a
political wind blowing across Europe," said Joe Manimbo, senior
market analyst at Western Union Business Solutions in
Washington. "Everything is pointing to further strengthen the
dollar." 
    U.S. President Donald Trump is expected to make an
announcement at 2 p.m. (1800 GMT) on the nuclear deal, which
eased economic sanctions in exchange for Tehran limiting its
nuclear program. Commodity-linked and emerging market currencies
slid on worries about a possible U.S. withdrawal, which would
hit risk appetite in financial markets.
    At 10:38 a.m. (1438 GMT), an index that tracks the greenback
versus the euro, yen, sterling and six other currencies
hit 93.280, its highest since December. It was last up 0.5
percent at 93.212.
    The dollar index had been down year to date but in three
weeks it has gained over 4 percent, erasing that loss.
    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," Manimbo said.
    The euro has declined to its weakest level since late
December. It was down about 0.6 percent to $1.1852 and
129.49 yen, Reuters data showed. 
    On Monday, Italy's two largest parties resisted President
Sergio Mattarella's call to rally behind a "neutral government."

    The pound declined to $1.3485, its lowest since
Jan. 11, Bank of England policy makers meet on Thursday, and are
expected to leave interest rates unchanged. 
    Among commodity-linked currencies, the Australian dollar
 fell 1 percent to $0.7441 after touching an 11-month
low.
========================================================
    Currency bid prices at 10:38AM (1438 GMT)
 Description      RIC         Last           U.S. Close  Pct Change     YTD Pct     High Bid    Low Bid
                                              Previous                   Change                 
                                              Session                                           
 Euro/Dollar      EUR=        $1.1852        $1.1920     -0.57%         +0.00%      +1.1939     +1.1839
 Dollar/Yen       JPY=        109.2500       109.0800    +0.16%         +0.00%      +109.2800   +108.8600
 Euro/Yen         EURJPY=     129.48         130.05      -0.44%         +0.00%      +130.1200   +129.2400
 Dollar/Swiss     CHF=        1.0029         1.0024      +0.05%         +0.00%      +1.0045     +1.0016
 Sterling/Dollar  GBP=        1.3494         1.3555      -0.45%         +0.00%      +1.3591     +1.3485
 Dollar/Canadian  CAD=        1.2969         1.2879      +0.70%         +0.00%      +1.2985     +1.2875
 Australian/Doll  AUD=        0.7439         0.7516      -1.02%         +0.00%      +0.7528     +0.7435
 ar                                                                                             
 Euro/Swiss       EURCHF=     1.1887         1.1952      -0.54%         +0.00%      +1.1962     +1.1877
 Euro/Sterling    EURGBP=     0.8780         0.8791      -0.13%         +0.00%      +0.8810     +0.8771
 NZ Dollar/Dolar  NZD=        0.6957         0.7015      -0.83%         +0.00%      +0.7030     +0.6955
 Dollar/Norway    NOK=        8.1480         8.0688      +0.98%         +0.00%      +8.1495     +8.0536
 Euro/Norway      EURNOK=     9.6570         9.6224      +0.36%         +0.00%      +9.6599     +9.6090
 Dollar/Sweden    SEK=        8.8245         8.8340      -0.71%         +0.00%      +8.8535     +8.7915
 Euro/Sweden      EURSEK=     10.4590        10.5340     -0.71%         +0.00%      +10.5485    +10.4408
 
    
 (Additional reporting by Saikat Chatterjee and Sujata Rao in
LONDON
Editing by Catherine Evans and David Gregorio)
  
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