May 28, 2018 / 12:49 AM / in 3 months

FOREX-Euro crawls off 6-1/2-month lows, Italian political woes limit bounce

* Euro bounces after last week’s steep decline

* Recovery limited with political turmoil in Italy set to deepen

* Dollar-yen, Aussie edge up as broader risk aversion ebbs for now

By Shinichi Saoshiro

TOKYO, May 28 (Reuters) - The euro crawled off a 6-1/2-month low against the dollar on Monday, catching its breath after last week’s steep decline, although broader concerns about political turmoil in Italy limited the currency’s recovery.

The euro was 0.35 percent higher at $1.1693 after falling on Friday to $1.1646, its lowest since mid-November, losing more than 1 percent on the week.

“The euro has managed to bounce, going through a bit of a consolidation. But fundamentally, it is still a ‘sell’ for the currency,” said Junichi Ishikawa, senior FX strategist at IG Securities in Tokyo.

“Euro zone economic fundamentals are the trunk and the region’s political woes are the protruding branches, and both are in facing headwinds right now.”

Italy’s president on Sunday rejected a eurosceptic pick for the key economy ministry, prompting the two populist parties to abandon plans to form a coalition and triggering a possible constitutional crisis.

Adding to the unrest in Europe, Spain’s prime minister, Mariano Rajoy, was threatened with no-confidence motions and demands for a snap election.

Data last week showed German PMI data fell to a 20-month low in May indicating that economic momentum in Europe’s biggest economy was faltering and European Central Bank minutes of its April meeting showed policymakers were worried about a more pronounced slowdown in the eurozone and political uncertainty in Italy.

The dollar index against a basket of six major currencies stood at 94.106 after rising to 94.248 on Friday, its highest since Nov. 14, on the back of the sagging euro.

The greenback rose 0.3 percent to 109.670 yen on an ebb in risk aversion after U.S. President Donald Trump said on Sunday a U.S. team had arrived in North Korea to prepare for a proposed summit between him and North Korean leader Kim Jong Un.

Trump had initially pulled out of the summit last week, which had sapped broader investor risk appetite and helped push the dollar to a two-week trough of 108.955 yen on Thursday.

The Australian dollar, which is sensitive to shifts in risk sentiment, gained 0.2 percent to $0.7563 after shedding 0.4 percent on Friday.

The New Zealand dollar edged up 0.1 percent to $0.6926 after losing 0.2 percent on Friday. (Editing by Sam Holmes)

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