Investing.com - The euro fell to a 20-month low against the dollar on Monday before rebounding after Italian voters rejected constitutional changes backed by the government, prompting Prime Minister Matteo Renzi to step down.
EUR/USD was last at 1.0645 after falling as low as 1.0507 earlier, the weakest level since March 2015.
EUR/JPY was at 121.41 after falling as low as 120.16 earlier, while EUR/GBP stabilized at 0.8367 after falling to 0.8305 earlier, a level not seen since July.
The euro came under pressure as political uncertainty in Italy escalated as Renzi said he would step down after voters rejected his attempts to reform the constitution.
Concerns over the financial health of the Italy’s ailing banking sector mounted amid fears that Renzi’s bank bailout program could be scrapped.
Italy’s banks are weighed down by bad loans and could possibly require a full-blown bailout from the European Central Bank.
Italy’s third-largest lender Monte dei Paschi di Sienas in the midst of a complex operation to shed €28 billion in bad loans and raise €5 billion as part of a rescue plan.
Last week, the ECB said it is ready to temporarily step up purchases of Italian government bonds should the referendum results drive up borrowing costs.
The dollar edged higher against a currency basket, as expectations for a rate hike by the Federal Reserve this month continued to underpin demand.
The U.S. dollar index, which measures the greenback’s strength against a trade-weighted basket of six major currencies, was up 0.19% at 100.93.
Data on Friday showed that the U.S. economy added 178,000 jobs in November from the prior month, while the unemployment rate dropped to a nine-year low of 4.6%.
The report also showed that average hourly earnings fell 0.1% from October, while the annual rate of wage growth also slowed.
The report underlined the Fed’s case for raising U.S. interest rates at its upcoming meeting next week, but the weak wage data clouded the outlook for further rate hikes in 2017.
Investors are currently pricing in a 100% chance of a rate hike this month, according to federal funds futures tracked Investing.com's Fed Rate Monitor Tool.
The dollar gained ground against the yen, with USD/JPY rising 0.48% to 114.07, still off the nine-and-a-half month high of 114.83 touched last week.
Sterling was little changed against the dollar, with GBP/USD at 1.2724 ahead of UK survey data on service sector activity later in the day.
The New Zealand dollar was also lower, with NZD/USD down 0.57% at 0.7099 after the country’s Prime Minister John Key unexpectedly announced his resignation after eight years in power.