Investing.com - The Japanese yen, a safe haven in uncertain times, firmed against the dollar on Tuesday amid further political uncertainty in Europe over Italy’s spending plans. The U.S. dollar index also rose.
The USD/JPY pair last traded at 112.57 by 1:00 AM ET (05:00 GMT), down 0.2%.
Reuters reported over the weekend that the Italian government expected the European Commission to decide for the first time to ask a member state to revise its draft budget later this week.
"Italy’s 2.3 trillion euro ($2.65 trillion) public debt, one of the world’s largest, makes the country vulnerable and a potential source of contagion for other euro zone countries,” Reuters reported citing three unnamed sources.
"Tensions are likely to heighten between Rome and Brussels, especially if the European Council launch an 'Excessive Deficit Procedure' against Italy," said Philip Wee, currency strategist at DBS in a note.
"This would require Italy to provide a plan of corrective action to rein in its large public debt, currently at 130 percent of GDP vs the 60 percent Maastricht rule," added Wee.
Meanwhile, recent reports suggested Brexit talks have stalled, sparking speculation that British Prime Minister Theresa May could be toppled by rebels in her Conservative Party.
Donald Tusk, the EU council president, said a no-deal scenario was “more likely than ever before”.
The U.S. Dollar Index that tracks the greenback against a basket of other currencies was up 0.4% at 95.79.
Elsewhere, the USD/CNY pair slipped 0.08% as the People's Bank of China (PBOC) set the yuan reference rate at 6.9338 vs the previous day's fix of 6.9444.
The Australian dollar was down 0.3% at $0.7063 against the U.S. dollar after sliding from levels above $0.711 yesterday. The NZD/USD pair also slid 0.4%.