June 11, 2018 / 5:18 PM / a year ago

FOREX-Italy's pledge boosts euro, Canadian dollar falls after G7

    * Traders see Trump's G7 showdown as true to form, not a surprise
    * Euro seen supported by Italy FM's comments before ECB meeting
    * Hope of a U.S.-North Korea deal underpins dollar/yen
    * Traders await hints from Fed on U.S. rate-hike path 

 (Updates market action, previous LONDON)
    By Richard Leong
    NEW YORK, June 11 (Reuters) - The euro rose to a near two-week high on Monday after
assurances from Italy that it would not leave the European Union calmed investors'
nerves before the European Central Bank's policy meeting on Thursday.
    Italy's economy minister Giovanni Tria said on Sunday his new coalition government
would not leave the euro or issue securities to pay off companies owed money by the
state, a plan investors viewed as a first step toward exiting the bloc. 
    Tria's promise sent Italian borrowing costs down sharply on Monday as the euro
inched up 0.1 percent to $1.1782 toward a two-week high of $1.1840 touched on
Thursday, Reuters data showed.
    "The Italy comments calmed fears but let's wait for the government's policy actions
this summer. That will decide the market's direction," said MUFG currency strategist
Lee Hardman.
    Investors are raising their bets that the ECB will signal at a policy meeting later
this week a tapering down of its 2.55 trillion euro bond-buying program as early as
September, following a flurry of hawkish comments by officials last week.

    The euro bounced despite heightened worries about a global trade war following a
spat at the Group of Seven summit in Canada between U.S. President Donald Trump and
other leaders over automobile tariffs and other issues.  
    Trumped lashed out at Canada and Europe over the U.S. trade deficit after he
arrived in Singapore, where he is due to hold a critical meeting with North Korean
leader Kim Jong Un in Singapore on Tuesday.
    The Mexican peso and Canadian dollar slid on fears that Trump may scrap the North
American Free Trade Agreement (NAFTA). 
    The Canadian dollar fell 0.5 percent to C$1.2993, while the Mexican peso
 shed 1.1 percent at 20.522 peso per U.S. dollar.  
    Analysts said the fairly muted reaction in currencies reflected the low
expectations markets had for the G7 summit, despite the fact that the euro is sensitive
to the threat of U.S. tariffs on cars.
    "Trade tensions are dominating in the aftermath of the G7 summit and headline risk
is set to remain elevated in the absence of any significant domestic releases,"
ScotiaBank analysts wrote in a research note.
    Before the ECB meeting, the U.S. Federal Reserve is almost unanimously expected to
raise interest rates for the second time this year on Wednesday. The market's focus
will be on the Fed's projection on the path of future interest rates.
    Futures market implied traders expect the Fed to raise overnight borrowing at least
one more time in 2018 after a possible rate increase on Wednesday, according to CME
Group's FedWatch program.
    The dollar index was steady at 93.597, rising further from a three-week low
set last Thursday.
    Currency bid prices at 1257 EDT (1657 GMT):
 Description      RIC       Last      U.S. Close  Pct     YTD Pct  High Bid   Low Bid
                                      Previous    Change  Change              
 Euro/Dollar      EUR=      $1.1786   $1.1766     +0.17   -1.75    +1.1820    +1.1754
 Dollar/Yen       JPY=      110.0200  109.5300    +0.45   -2.35    +110.0600  +109.2300
 Euro/Yen         EURJPY=   129.69    128.90      +0.61   -4.06    +130.0500  +128.5300
 Dollar/Swiss     CHF=      0.9854    0.9850      +0.04   +1.14    +0.9873    +0.9840
 Sterling/Dollar  GBP=      1.3379    1.3410      -0.23   -0.98    +1.3441    +1.3346
 Dollar/Canadian  CAD=      1.2990    1.2924      +0.51   +3.28    +1.3027    +1.2955
 Australian/Doll  AUD=      0.7611    0.7599      +0.16   -2.44    +0.7621    +0.7569
 Euro/Swiss       EURCHF=   1.1619    1.1590      +0.25   -0.60    +1.1657    +1.1593
 Euro/Sterling    EURGBP=   0.8809    0.8774      +0.40   -0.83    +0.8831    +0.8775
 NZ Dollar/Dolar  NZD=      0.7028    0.7031      -0.04   -0.82    +0.7053    +0.7011
 Dollar/Norway    NOK=      8.0406    8.0537      -0.16   -2.03    +8.0754    +8.0229
 Euro/Norway      EURNOK=   9.4812    9.4821      -0.01   -3.73    +9.5318    +9.4738
 Dollar/Sweden    SEK=      8.6674    8.7066      -0.38   +5.68    +8.7294    +8.6453
 Euro/Sweden      EURSEK=   10.2180   10.2573     -0.38   +3.85    +10.2780   +10.2056

 (Additional reporting by Tom Finn in London; Editing by Jon Boyle and Will Dunham)
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