Forex Market Update: Euro Falls Sharply Amid Political Uncertainty in Italy

The euro fell sharply against the U.S. dollar and the Japanese yen on Monday amid political uncertainty in Italy. The yen, meanwhile, rebounded against the dollar after falling to a 33-month low earlier in the day.

The euro came under pressure after exit poll results suggested that Italy might end up with a hung parliament following the election on Monday. Political uncertainty could derail Italy’s reform process, which was put in place by Mario Monti’s technocratic government.

The euro had edged higher earlier in the day following a successful Italian bond auction. The single currency also gained after initial exit poll results showed that the center left coalition was leading. However, the euro slipped after latest exit poll results showed that Silvio Berlusconi’s center right coalition was leading the Senate race.

The prospect of a hung parliament in Italy has spooked traders. Speaking to Reuters, Joe Manimbo, Senior Market Analyst at Western Union Business Solutions, said that it is just a continuation of renewed political risk in Italy.

At last check on Monday, the euro was down 0.6% to $1.3096. Earlier in the day, the single currency fell to 1.3077 against the dollar, the lowest level since January 10. The euro fell 1.2% to 121.68 yen. It hit an intra-day low of 120.88 yen.

The yen, meanwhile, rebounded against the dollar after falling sharply initially. The Japanese currency fell to a 33-month low against the dollar on Monday after news that Japan’s Prime Minister, Shinzo Abe, is expected to nominate Haruhiko Kuroda, President of Asian Development Bank, as the next Bank of Japan (BOJ) governor. Kuroda has been a proponent of more accommodative monetary policy.

The yen recovered in late trading on Monday. At last check, it was up 0.6% against the dollar.

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Post Written By: Ed Liston Ed Liston is a senior contributing editor at TheStockMarketWatch.com. An active market watcher and investor, Ed guides an independent team of experienced analysts and writes for multiple stock trader publications. He is widely quoted in various financial publications on the Internet. When Ed is not writing about stocks, investing in stocks, talking about stocks, or otherwise doing something stock related, he likes to go sailing and fishing in his yacht.