Investing.com - The euro and the dollar were steady on Wednesday as investors positioned ahead of the outcome of Thursday’s European Central Bank meeting.
EUR/USD was little changed at 1.0718.
The single currency slumped to 20-month lows on Monday after Italian Prime Minister Matteo Renzi's referendum defeat and subsequent confirmation that he would resign.
But the euro quickly rebounded as fears over the political risk factors for Italy appeared to have been overstated.
But concerns over Italy’s ailing banking sector remained in focus. Reuters reported late Tuesday that the government was preparing to take a €2 billion controlling stake in Monte dei Paschi, one of the country’s many troubled lenders.
Investors also remained cautious ahead of the ECB’s policy meeting on Thursday.
The ECB is seen as likely to announce an extension of its quantitative easing program, but any indication that it could begin tapering asset purchases could offset the effect of extending its stimulus program.
The dollar was holding steady against a basket of six other major currencies, with the U.S. dollar index at 100.52.
The dollar pushed higher against the yen, with USD/JPY rising 0.16% to 114.20, still off the nine-and-a-half month high of 114.83 touched last week.
Demand for the dollar continued to be underpinned by expectations that the Federal Reserve will hike interest rates this month.
According to Investing.com's Fed Rate Monitor Tool, 100% of traders expect the Fed to raise interest rates at its December 13-14 meeting.
The Australian dollar was lower, with AUD/USD down 0.4% to 0.7430 after data showing that the economy contracted by 0.5% in the third quarter.
The Reserve Bank of Australia conceded that growth would slow when it left interest rates on hold on Tuesday, but also predicted that it would pick back up.
Sterling was lower, with GBP/USD down 0.5% at 1.2631.
The pound had hit nine-week highs of Tuesday after Chancellor Philip Hammond said the British government would not rule out the possibility of continuing to make payments into the European Union budget after Brexit in order to retain access to the single market.