LONDON, Nov 12 (Reuters): The dollar surged to nearly 17-month highs on Monday against a basket of major currencies as investors sought out the liquid and high-yielding asset against a backdrop of global growth worries and rising political risk in Italy and Britain.
Investors are fretting about signs of slowing growth worldwide but especially in China where e-commerce giant Alibaba was the latest to raise alarm bells, with the slowest ever annual sales growth during its Singles Day shopping event.
Many also reckon that U.S. President Donald Trump could turn up the heat over trade, further damaging China's economy.
All that, coupled with European political risks, conspired to push the dollar 0.5 per cent higher against a basket of currencies by 1230 GMT.
"King dollar has staged a return," Valentin Marinov, head of G10 FX strategy at Credit Agricole, said, adding that investors had piled back into the dollar after last week's U.S. Federal Reserve meeting confirmed a rate-tightening path.
"Euro and pound are both hurt by political risk and that is aggravating underperformance versus the dollar," Marinov said.
Sterling lost more than one percent at one point, holding near a 10-day low hit earlier, while the euro, comprising more than 50 percent of the dollar index, fell 0.7 percent to its lowest since July 2017.
British Prime Minister Theresa May's Brexit strategy came under attack from all sides, increasing the risk that her plan for leaving the European Union will be voted down by parliament, thrusting the United Kingdom toward a potentially chaotic "no-deal" Brexit.
The opposition Labour Party said that if May's Brexit deal was voted down in parliament, it would push for a national election and possibly also another referendum.
Deutsche Bank analysts, however, predicted more pain, telling clients: "not enough risk is priced into sterling given the parliamentary problems ahead".
In the euro zone, Italy faces a Tuesday deadline to submit a revised budget to the EU, but its refusal so far to cut the draft deficit sets the stage for a collision with Brussels.
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