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Dollar hits 4-month highs vs. euro, falls vs. yen

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Shutterstock photo - The dollar rose to four-month highs against the broadly weaker euro on Wednesday and erased gains against the yen as growing concerns over potential fallout from a bailout for Cyprus and political deadlock in Italy bolstered safe haven demand.

During European late morning trade, the dollar rose to its highest level since late November against the euro, with EUR/USD falling 0.66% to 1.2777.

Investors remained concerned that the bailout deal for Cyprus could set a precedent for future bailouts in larger euro zone states, with big bank depositors and senior bond holders forced to suffer losses.

Meanwhile, worries over a political stalemate in Italy mounted after a leading Italian politician cast doubt on prospects for forming a new government.

The euro extended losses following media reports that Pier Luigi Bersani, the head of Italy's center-left alliance, ruled out forming a coalition government, saying that only an "insane person" would want to govern Italy.

Elsewhere, data showed that economic confidence across the euro zone declined this month, reversing four months of gains, reinforcing concerns over the economic outlook for the currency bloc.

The European Commission's economic sentiment index slumped by 1.1 points to 90.0, led lower by falling optimism among manufacturers.

The dollar gave up gains against the yen, with USD/JPY falling 0.20% to 94.27, down from session highs of 94.91.

The yen's gains looked likely to remain limited as expectations for more aggressive easing measures by the Bank of Japan remained intact.

The dollar was higher against the pound, with GBP/USD dropping 0.37% to 1.5105.

The pound hit session lows against the dollar after official data showed that U.K. gross domestic product contracted by 0.3% in the three months to December, in line with preliminary estimates and economists' forecasts.

Economic growth for 2012 was revised down to 0.2% from a preliminary estimate for 0.3% growth.

The dollar was higher against the Swiss franc, with USD/CHF rising 0.52% to 0.9529.

The greenback was broadly higher against its Canadian, Australian and New Zealand counterparts, with USD/CAD climbing 0.30% to 1.0190, AUD/USD losing 0.48% to trade at 1.0434 and NZD/USD down 0.48% to 0.8350.

In New Zealand a report showed that the ANZ business confidence index fell to 34.6 in March from a reading of 39.4 the previous month.

The dollar index, which tracks the performance of the greenback versus a basket of six other major currencies, was up 0.44% to 83.40.

The U.S was to release private sector data on pending home sales later in the trading day. - offers an extensive set of professional tools for the Forex, Commodities, Futures and the Stock Market including real-time data streaming, a comprehensive economic calendar, as well as financial news and technical & fundamental analysis by in-house experts.

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