The dollar fell on Tuesday, reversing gains to a near six-month high, as the euro rallied after Italian Prime Minister Giuseppe Conte said the government had never considered leaving the euro zone.
"Conte's comments were reassuring to investors given the make-up of the Italian coalition and its previous statements and certainly helped pushed the euro higher," said Omer Esiner, chief market analyst, at Commonwealth Foreign Exchange in Washington.
Conte told parliament on Tuesday that his new government had no plans to leave the euro zone. Italy's ruling coalition's original choice as economy minister, euro-skeptic economist Paolo Savona, was turned down by the head of state because of his views on the euro. He was replaced by a more reassuring figure for financial markets.
The euro also benefited as Bloomberg, citing sources, reported that the European Central Bank could conclude its next policy meeting this month with a public announcement on when its quantitative easing program would end, analysts said.
Markets have not been expecting an announcement on QE this month given the uncertainty caused by the Italian political situation.
"The most recent data out of the euro zone has dampened expectations for near-term change in monetary policy by the ECB," Esiner said. "The (Bloomberg) report suggests that the ECB may be looking past the softness in economic data out of the euro zone, and the political headwinds in Italy to focus on a gradual normalization of monetary policy," he added.
The euro rose 0.1 percent against the dollar to $1.1712, which pushed the dollar index, also 0.1 percent lower to 93.894.
Earlier in the session, the dollar had rallied as the latest development in a growing trade conflict between the United States and its commercial partners prompted selling in emerging market currencies.
Mexico said it would impose a 20 percent tariff on US pork imports after US President Donald Trump slapped tariffs on steel and aluminium.
The tariff was in response to the Trump administration's decision last week to impose steel and aluminum tariffs on Mexican exporters on grounds that countries including Mexico engage in competition damaging to US national security.
The Mexican peso and Canadian dollar posted the biggest losses against the US dollar as trade war concerns rose. Other emerging market currencies such as the South African rand also fell in tandem with the peso.
The peso fell to a more than one-year low against the dollar, which was last up 1.5 percent at 20.3762 pesos. Against the Canadian dollar, the US currency rose 0.4 percent to C$1.2980.
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