The euro bounces as Italian borrowing costs fall considerably

LONDON (Reuters) – The euro rebounded on Monday as a result of lower borrowing costs of Italian governments following the recent wave of calm that prevailed in the market, while the promises of Chinese stimulus helped dispel broader political concerns.

The rating agency Moody's lowered the Italian government's credit rating on Friday but unexpectedly kept the outlook stable.

Deputy Prime Minister Luigi Di Maio's statements that the government was ready to sit down with the European Union in the face of the Rome budget dispute boosted demand for Italian debt after a strong sell-off in last weeks.

The euro has often fallen this year as Italian government bond yields rose.

The single currency rose 0.3% to 1.1550 USD =, hitting the high of the day and moving away from the recent lows of 1.1433 USD.

The dollar index fell 0.3% to 95,472 .DXY.

The euro also rose 0.2% to CHF 1.1477 billion and gained 0.2% against the pound sterling to 88.26p EURGBP =.

Despite the rebound in the euro, analysts said he remained at the mercy of Italian developments, with many uncertainties ahead.

"… A full diary of at-risk events over the next two weeks and few arguments in favor of the ECB's (European Central Bank) support in the near future, remains to be seen how much the gap performance can disappear and how this could affect the FX market, "said Simon Derrick, chief foreign exchange strategist at BNY Mellon.

The stock markets were largely in positive territory, hoping that China's tax cuts to more than 1% of its gross domestic product will spark renewed interest, prompting a rebound in Asian equities that have fueled Europe. .

This helped to alleviate the geopolitical concerns over the rift between Saudi Arabia and the West following the assassination of a prominent critic of the kingdom, as well as the l? concern over Britain's conclusion of an exit agreement with the EU.

Forex markets have been largely calm, although the more positive tone of the week has stoked sentiment.

For the dollar, a hawkish federal reserve and signs of the strength of the US economy remain key factors.

"The markets will closely follow Friday's release of the advanced US GDP figure for clarity on the direction of the US dollar," said Sim Moh Siong, currency strategist at Bank of Singapore.

The dollar rose against the Japanese yen JPY =. The yen hit 112.71%, down 0.2% that day and hit a one-month high of 111.61 as of October 15th.

The yen benefited from rising risk around the Brexit, the Italian fiscal plan and trade tensions, as investors tend to buy the Japanese currency when they are nervous.

The Canadian dollar, the Canadian dollar = changed hands at 1.3080 on its US counterpart, on the eve of a low of 1.3132 on Friday, due to lower inflation and retail sales.

The AUD = Australian dollar, often considered a barometer of overall risk appetite, has traded at $ 0.7122, in a single day.

(Graph: World exchange rate in 2018 tmsnrt.rs/2egbfVh)