• Euro[1] edges up from five-month low as Italy-linked worries cool
  • NZ Dollar gains, Yen falls as risk appetite firms in APAC trade
  • Canadian Dollar[2] falls as Lighthizer deflates NAFTA deal hopes

The Euro managed to recover a bit of lost ground in Asia Pacific trade after sinking to a five-month low against an average of its major counterparts yesterday. The spread between German and Italian 10-year Treasury bond yields narrowed a bit yesterday, hinting at ebbing worries about the likely politics of an emerging anti-establishment coalition government in Rome.

That yield spread hit the highest level since January earlier in the week, reflecting a rising risk premium to owning Italian paper. Markets turned jittery as the populist Five-Star Movement and the right-wing League negotiated a joint policy platform. Rumors suggested it might include a demand for the ECB to cancel a large chunk of Italian debt.

Elsewhere, currency markets took their cues from broad-based risk appetite trends. The frequently sentiment-geared New Zealand Dollar[3] traded higher alongside regional share prices to outperform against its G10 FX counterparts. Corrective flows probably helped as well after the currency’s outsized losses yesterday. The perennially anti-risk Japanese Yen[4] was weakest on the session.

The Canadian Dollar declined as well, building on losses sustained in late North American trade[5] after US Trade Representative Robert Lighthizer said NAFTA countries are “nowhere near a deal” on a renegotiated trade pact. Defensive pre-positioning ahead of April’s CPI report may have

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