The euro rose to a near two-week high on Monday after assurances from Italy that it would not leave the European Union calmed investors' nerves before the European Central Bank's policy meeting on Thursday. Italy's economy minister Giovanni Tria said on Sunday his new coalition government would not leave the euro or issue securities to pay off companies owed money by the state, a plan investors viewed as a first step toward exiting the bloc.
Tria's promise sent Italian borrowing costs down sharply on Monday as the euro inched up 0.1 percent to $1.1782 toward a two-week high of $1.1840 touched on Thursday, Reuters data showed.
"The Italy comments calmed fears but let's wait for the government's policy actions this summer. That will decide the market's direction," said MUFG currency strategist Lee Hardman.
Investors are raising their bets that the ECB will signal at a policy meeting later this week a tapering down of its 2.55 trillion euro bond-buying program as early as September, following a flurry of hawkish comments by officials last week.
The euro bounced despite heightened worries about a global trade war following a spat at the Group of Seven summit in Canada between US President Donald Trump and other leaders over automobile tariffs and other issues.
Trumped lashed out at Canada and Europe over the US trade deficit after he arrived in Singapore, where he is due to hold a critical meeting with North Korean leader Kim Jong Un in Singapore on Tuesday. The Mexican peso and Canadian dollar slid on fears that Trump may scrap the North American Free Trade Agreement (NAFTA).
The Canadian dollar fell 0.5 percent to C$1.2993, while the Mexican peso shed 1.1 percent at 20.522 peso per US dollar. The dollar index was steady at 93.597, rising further from a three-week low set last Thursday.