The dollar tumbled versus the euro in late morning dealing Monday, after reports surfaced indicating that the International Monetary Fund may provide financial aid to Italy.
Luc Everaert, the IMF’s European division, said the IMF cannot rule out targeted funds to help Italy avert a full-blown sovereign debt crisis, according to a Wall Street Journal report citing Dow Jones.
The failure of the U.S. Congressional supercommittee to agree on budget cuts also hurt the dollar, helping the euro rebound from early losses brought on by a warning from Moody’s that it may downgrade French debt.
“Elevated borrowing costs persisting for an extended period would amplify the fiscal challenges the French government faces amid a deteriorating growth outlook, with negative credit implications,” Moody’s ratings agency said.
Numerous sources the European Commission may recommend a common eurobond as an option that may help the region survive its sovereign debt crisis.
German officials expressed skepticism for any plan that would collectivize debt.
“The chancellor and the government don’t share the belief of many that euro bonds now would be a universal cure for the crisis,” Angela Merkel’s spokesman Steffen Seibert said this morning.
Borrowing costs remained high in Spain, even after its Socialist government was swept out of office in favor of the cost-cutting center-right.
The dollar dropped back to $1.3540, giving up all of its early gains after hitting $1.3440.
The greenback eased from a monthly high near $1.5600 versus the sterling, leveling off to $1.5660.
On the other hand, the dollar was able to creep slightly higher versus the safe haven yen, improving to Y76.90.
The dollar hit a monthly peak above $1.04 versus its Canadian counterpart.
In economic news from the U.S., existing home sales showed an unexpected increase in the month of October, according to a report released by the National Association of Realtors on Monday, with the increase in sales contributing to a continued decrease in the number of homes on the market.
NAR said existing home sales rose 1.4 percent to an annual rate of 4.97 million in October from a downwardly revised 4.90 million in September. Economists had expected existing home sales to drop to 4.80 million.
Canadian wholesale sales increased for a fifth consecutive month in September, although the pace of the increase was less than forecast by economists, official data showed Monday morning.
Statistics Canada said wholesale sales rose 0.3 percent to C$48.7 billion, with volumes down 0.5 percent.
Recent data suggest that the German economy is expanding at a markedly slower pace in the final quarter of the year as demand for exports moderate as the global economy slows, the Finance Ministry said in a report on Monday.
In the November Monthly Report, the ministry said the biggest Eurozone economy grew 0.5 percent in the third quarter largely due to domestic demand.