The euro slips after the Italian legislator talks about the national currency

LONDON (Reuters) – The euro has fallen to its lowest level for six weeks on Tuesday, after a ruling party official, the Italian government, said most of the country's problems would be solved in the near future. It was removing the euro in favor of a national currency, thus causing a large sale in the markets.

The euro also weakened against the yen and the Swiss franc, while the dollar hit a new high of one month as investors enriched in the greenback. and sold riskier assets such as stocks.

Markets are very sensitive to Italian political developments after ruling parties have proposed a budget with a deficit target higher than expected, exacerbating tensions with other leaders of the eurozone and worried investors who want Rome to control its debt.

The weakness of the euro, combined with a further surge in the dollar, is gaining momentum despite investors positioning the greenback in a tight state.

The single currency slid to 1.1507 dollars, its weakest since 21 August. Against the yen, the euro lost 0.9% to 130.80 and fell 0.6% against the Swiss franc to 1.137 franc.

"We are facing a war of words, the euro on one side and Italy on the other … there are many big risks," said Valentin Marinov, head of G10 foreign exchange strategy for Crédit Agricole.

Mr Marinov said that he did not expect that the situation in Italy weighs heavily on the euro in the medium term because there was "no real evidence of contagion "likely to worry the European Central Bank and encourage it to postpone the end of its fiscal stimulus.

Most of the euro's losses came after Claudio Borghi, the economic leader of the ruling party, said Italy would benefit from more favorable economic conditions outside the eurozone.

Borghi later resumed the opinion and said that the Italian government had no intention of leaving the euro.

Italian Deputy Prime Minister Luigi Di Maio, who accused EU officials of deliberately upsetting the financial markets with negative comments on Italy's budget proposals, also that his country would not change its budget deficit targets.

Commerzbank analysts said that even if the European Union does not reject Italy's budget, it could still be an obstacle for the euro, especially since some analysts expect what rating agencies degrade the Italian public debt.

"Even if the subject (of Italy) seems to be in the background for the foreign exchange market, market players should monitor it closely. He can cook faster than we think, "they said.

DOLLAR RALLY

The dollar index rose 0.4% to 95.684, a peak of one month.

Fears over trade disputes between the United States and its major trading partners, including China, have pushed the dollar higher this year, as has an increasingly confident US Federal Reserve, as the central bank American seems more and more alone in tightening its policy.

Against the yen, the dollar fell to 113.74 yen on the safe haven status of the Japanese currency.

The announced trade agreement between Canada and the United States announced on Monday had brought the yen down to 114.06 percent, the lowest in 11 months, boosting investors' appetite for risk-taking.

The Australian dollar – often seen as a barometer of risk appetite – fell 0.9% to 0.7162 USD, as global markets sold off on eurozone concerns.

The Reserve Bank of Australia has announced that it has kept its interest rates at 1.5%, a decision widely expected.

The Canadian fell 0.2% to 1.2834 Canadian dollar per dollar, offsetting some of his gains the day before.