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* The euro is progressing despite the rejection of the Italian budget by the European Commission
* Italian Deputy Prime Minister denies being open to revision of budget plans
* Dollar seems to be bidding despite fears of global growth
* The yen is down and the pound sterling rising as investors wait for the Brexit's evolution
* Chart: Global exchange rates in 2018 tmsnrt.rs/2egbfVh (Add Salvini comments, price updates)
By Tom Finn
LONDON, November 21 (Reuters) – The euro has strengthened Wednesday amid hopes of a compromise on the Italian budget, although the EU has rejected budget plans of Rome for not respecting the rules of the euro area.
The European Commission took its first steps on Wednesday to discipline Italy on its draft budget and said the government should deal with the EU's action to reduce its deficit.
This did not prevent the single currency from reaching a daily high of 1.1418 dollars, up 0.4%, after Italian Prime Minister Giuseppe Conte worried about the spread of bonds government and respond with reforms.
The euro had already referred to a report according to which Deputy Prime Minister Matteo Salvini might be willing to review the financial plan for 2019.
Salvini then said that he was not ready to negotiate on the Italian domestic deficit reduction target of 2.4% gross domestic product, although other aspects of the budget can be discussed.
The euro has risen in six of the last seven sessions, but analysts said its currency remains vulnerable to the political risks emanating from the third largest economy in the eurozone comprising 19 countries.
"The potential for conflict between Rome and Brussels can have an impact on the overall economic growth of the euro area, which will keep the euro under pressure," said Michael McCarthy, chief market strategist at CMC Markets.
The strength of the euro weighed on the dollar index, a measure of performance against the six major currencies, down 0.2% to 96.557. The index had gained 0.65% the day before.
The dollar was supported by investors in search of the safe haven currency because of growing concerns over global growth and a trade war between the United States and China.
However, the currency felt some downward pressure this week following comments by Federal Reserve officials who were worried about a possible global slowdown. These comments led some investors to bet that the rate hike cycle was about to end.
The Japanese yen fell 0.4% to trade at 112.71.
Despite its safe haven status, the strength of the yen has been reduced. Analysts suspect this because Japanese investors have kept their money in the US and overseas markets rather than bringing it home.
The pound sterling rose 0.2% to 1.2808 dollars after losing 0.5% against the dollar on Tuesday. The pound is expected to move sideways until the market gets more details on the progress made under the Brexit contract.
The Canadian dollar fell to its lowest level in four months against the dollar to settle at 1.3305 as the price of crude fell to its lowest level in more than a year. Canada is one of the world's leading oil exporters.
Elsewhere, the Australian dollar, often considered a barometer of risk appetite, gained 0.4% to trade at $ 0.7245. The Australian dollar lost more than 1% Tuesday, due to the deterioration of confidence in risk. (Additional report by Vatsal Srivastava, edited by Toby Chopra)
