Forexpros – The U.S. dollar added to steep gains against most of its major counterparts on Wednesday, as concerns over the debt crisis in the euro zone deepened after Italian borrowing costs climbed to near unsustainable levels.
During U.S. morning trade, the dollar was sharply higher against the euro, with EUR/USD tumbling 1.87% to hit 1.3577.
The euro fell sharply after the yield on two-year and 10-year Italian government bonds climbed above the 7% threshold which prompted Greece, Ireland, and Portugal to seek international bailouts, after a Paris based clearing house hiked the margin call on Italian bonds.
The move came after Italian Prime Minister Silvio Berlusconi announced late Tuesday that he would step down after parliament approves next year’s budget, but uncertainty remained over whether Italy’s new government will be able to shore up growth and implement austerity measures.
Meanwhile, Greek officials were still struggling to form a new coalition government.
The greenback was also sharply higher against the pound, with GBP/USD falling 0.89% to hit 1.5947.
Earlier in the day, official data showed that the U.K. trade deficit widened unexpectedly in September, increasing to GBP9.8 billion, the largest deficit on record, compared to a deficit of GBP8.6 billion in August.
Economists had expected the trade deficit to contract to GBP8.0 billion in September.
Elsewhere, the greenback was almost unchanged against the yen but strengthened against the Swiss franc, with USD/JPY dipping 0.02% to hit 77.70, and USD/CHF surging 1.22% to hit 0.9060.
In addition, the greenback was sharply higher against its Canadian, Australian and New Zealand counterparts, with USD/CAD jumping 1.11% to hit 1.0199, AUD/USD plunging 2.07% to hit 1.0176 and NZD/USD dropping 1.81% to hit 0.7838.
In Canada, official data showed that the new home price index rose in line with expectations in September, gaining 0.2% after rising by 0.1% the previous month.
The dollar index, which tracks the performance of the greenback versus a basket of six other major currencies, surged 1.48% to hit 77.94.
Also Wednesday, a spokesman for German Chancellor Angela Merkel said Germany was concerned about recent developments in financial markets and is watching developments in Italy with “great interest.”
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