Euro loses face in Italy

Euro loses face in Italy

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The euro fell to $1.2233 in relation to the US dollar in early trading on Friday before recovering to $1.2280 later in the day.

The early decline was spurred by comments from Roberto Maroni, Italy’s welfare minister, indicating his belief that Italy should reinstate the lira to circulate in addition to the euro. His comments and the reaction of the currency markets to it reflect concerns about the viability of the eurozone after this week’s rejection of the European Union constitution by France and the Netherlands.

The later recovery came after the release of the euro zone’s service sector purchasing managers’ index for May and in anticipation of US jobs data which was to be released later in the day. The May service sector figures surprised analysts by going up to 53.5 in May after coming in at 52.8 in April.

These figures put in question the assumption that the eurozone is poised to enter a recession. Data for the individual countries in the eurozone varied from Germany’s nine-month high to Italy’s seven-year low. Even though the news from the service sector was good, the euro still fell ¥0.4 to ¥132.51 against the yen and lost 0.1 centime in relation to the Swiss franc, to SFr 1.5342. Sterling also fell compared to the yen, down ¥0.45 to ¥196.05.