Investing.com - The dollar eased against the euro on Tuesday, but remained close to seven-week highs as uncertainty over Italian election results looked likely to threaten economic reforms and reignite financial instability in the euro zone. During European morning trade, the dollar was hovering near seven-week highs against the euro, with EUR/USD easing up 0.10% to 1.3076. Italy’s center-left coalition, led by the Democratic Party's Pier Luigi Bersani, won the majority of votes in the lower house and was likely to receive the mandate to form a government. However, projections indicated that no party would be able to form a majority in the upper house, leading to a deadlock. The yield on Italian 10-year bonds jumped to 4.82% on Tuesday from 4.37% on Monday, while the yield on Spanish 10-year bonds rose to 5.4% from 5.1% on Monday. Elsewhere, the dollar pushed higher against the yen, trimming some of the previous session’s steep losses, with USD/JPY up 0.26% to 92.06 as expectations for more aggressive easing steps by the Bank of Japan remained intact. The greenback was trading near 31-month highs against the pound, with GBP/USD edging up 0.05% to 1.5168. Sentiment on sterling remained weak after rating’s agency Moody’s downgraded the U.K.’s triple-A rating by one notch, reinforcing concerns that the Bank of England may resume asset purchases this year. Elsewhere, the greenback was lower against the Swiss franc, with USD/CHF down 0.18% to 0.9306. The greenback was rangebound against its Canadian, Australian and New Zealand counterparts, with USD/CAD dipping 0.06% to 1.0253, AUD/USD inching up 0.03% to 1.0260 and NZD/USD slipping 0.11% to 0.8317. The Australian dollar came under pressure earlier after a senior official at the Reserve Bank of Australia said policymakers are willing to cut interest rates further to offset the strong Australian dollar as economic growth slows. The dollar index, which tracks the performance of the greenback versus a basket of six other major currencies, slipped 0.09% to 81.77. Market participants were looking ahead to congressional testimony from Federal Reserve Chairman Ben Bernanke later in the trading day, after last week’s minutes of the central bank’s January meeting showed that some policymakers favored an early end to the Fed's monetary easing measures. The U.S. was also to release a report on consumer confidence and official data on new home sales later Tuesday.

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