Investing.com - The euro extended early losses on Tuesday, falling to fresh seven-week lows as concerns over Italy’s fiscal outlook and a broadly stronger dollar weighed.
EUR/USD was down 0.41% to 1.1444 by 07:16 AM ET (11:16 AM GMT), the weakest level since August 20.
The single currency was pressured lower amid an ongoing row between Italy’s populist government and the European Commission over the country’s budget plans.
Brussels and Rome have been at odds over the country's budget deficit plans for the next three years, which breach EC rules on running excessive deficits and high debt.
The row has seen Italian bond yields rise amid fears that the decision to increase borrowing will prove unsustainable given the country’s debt load.
But the leaders of Italy’s two ruling parties have insisted they will not backtrack on their spending plans for next year.
Sentiment on the euro was also hit after data showing that German exports fell unexpectedly in in August, adding to concerns over a loss of momentum in the euro area’s largest economy.
Meanwhile, the International Monetary Fund cut its global growth forecast on Tuesday, warning that trade conflicts are starting to have a serious impact on the global economy.
The IMF downgraded its outlook for the U.S., China, the euro zone and the UK, saying it now expects the global economy to expand by just 3.7% in 2018 and 2019, down from 3.9% before.
The euro fell to almost one-month lows against the safe haven yen, with EUR/JPY shedding 0.42% to trade at 129.58.
Demand for the dollar continued to be underpinned as the move higher in U.S. Treasury yields continued, albeit at a slower pace than last week, sending the yield on 10-year Treasury notes to a fresh seven-year peak.
The U.S. dollar index, which measures the greenback’s strength against a basket of six major currencies, was up 0.29% to 95.72, within close reach of the six-week high of 95.78 reached late last week.
The sell-off in Treasuries has been spurred by expectations for a potentially faster pace of rate hikes from the Federal Reserve. Rising bond yields have hit demand for stocks in recent sessions, souring risk appetite.
The dollar was little changed against the yen, with USD/JPY holding steady at 113.19.