29.05.201801:17:00UTC+00Euro Hovers Near 6-½-Month Lows on Italy Concerns

The euro struggled near a 6-½-month low versus the dollar on Tuesday, as the bounce seen at the beginning of the week faded and investors took a grim view on the prospect of new elections in Italy.

The single currency last stood at $1.1629 after falling overnight to $1.1607, its lowest since Nov. 9. It had jumped to $1.1728 earlier on Monday after Italian President Sergio Mattarella rejected a vocal critic of the single currency as economy minister.

However, Mattarella's veto angered the anti-establishment parties which had been trying to forge an alliance, prompting them to abandon their coalition plans and setting the stage for new elections.

Financial markets fear that the elections, which could take place as early as August, are seen as a quasi-referendum over Italy's role in the European Union and eurozone and could end up strengthening eurosceptic parties even further.

Such worries have resulted in a big sell-off of Italian debt and a surge in safe-haven German bond prices. As a result, the yield spread between 10-year German and Italian bonds was at its broadest since December 2013.

The dollar, which measures the greenback against a basket of six major currencies, rose 0.2 percent to stay near the highest since mid-November.

Against the Japanese yen, the greenback fell to 109 to edge closer to a recent three-week trough of 108.94.

Analysts will next focus their attention on U.S. inflation data due later in the week which could provide clues to future interest rate rises ahead of the Federal Reserve policy meeting next month.