2018.05.3001:17:00UTC+00Euro Near Multi-Month Lows Amid Italian Political Crisis

The euro hovers near multi-month lows versus major currencies on Wednesday as Italy's political crisis deepened, raising the likelihood of an early election that some market players fear could lead to a eurosceptic government in Rome.

Sources close to some of Italy's main parties said there was currently a chance that President Sergio Mattarella could dissolve parliament in the coming days and send Italians back to the polls as early as July 29.

The euro, which fell to a 10-month low of $1.1510, last traded at $1.1542. The common currency has lost 4.5 percent so far this month.

The 10-year Italian government bond yield soared to 3.19 percent as bond prices fell, versus just under 2 percent around two weeks ago. The two-year debt yield jumped to 2.71 percent overnight from 0.84 percent the day before.

The euro fell 1.0 percent against the safe-haven Swiss franc on Tuesday, its biggest daily drop since September, and last traded at 1.1445 francs.

For the month, it was down 4.4 percent, the biggest decline since January 2015, when the Swiss central bank suddenly scrapped its floor for the euro against the Swiss currency.

Against the yen, the euro traded at 125.31 yen after notching an 11-month trough of 124.62 yen overnight, from around 131 yen just over a week ago.

The dollar's index against a basket of six major currencies was at 94.829, near the technical double-top around 95.15 touched in October and November last year.

The dollar fell 0.3 percent to 108.38 yen, edging towards a five-week low of 108.115 yen hit the previous day as the risk-averse mood boosted the yen.

Investors are also wary of an escalation in trade frictions between the United States and China after the White House said that it still holds the threat of imposing tariffs on $50 billion of imports from China.