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NEW YORK, Feb 25 AFP

February 26 2013, 10:19AM

The strong election showing in Italy of former premier Silvio Berlusconi's party battered the euro on Monday, amid worries a new coalition government could weaken Rome's commitment to reforms.

The euro rose in early trade amid the first exit polls from the two-day election, which suggested the center-left was on its way to a firm victory.

But later, data showed Berlusconi's party, and another rightist party, were neck-and-neck with rivals in the Senate race, suggesting it could end up part of a fractious coalition that could roll back Italy's deficit-cutting efforts.

At ,2200 GMT (0900 Tuesday AEDT) the euro was at $1.3065, down from $1.3189, after having risen to $1.3316 early in the day as European markets read the early poll results as keeping Berlusconi out of power.

Beyond Italy's election results, "the single currency remains poised to face additional headwinds over the near-term as the fundamental developments coming out of Europe point to a deepening recession", said David Song of DailyFX.

But commitment to the dollar was hanging on the testimony to Congress on Tuesday by Federal Reserve Chairman Ben Bernanke, with hopes he will clarify the Fed's direction amid some clear differences among policy-makers over how long to keep in place policies aimed at holding interest rates down.

Reports that the pro-stimulus Haruhiko Kuroda, currently head of the Asian Development Bank, would be nominated as Bank of Japan governor weakened the Japanese currency in early trade, with the dollar buying more than 94 yen.

But without official backup for those reports, the yen snapped back, the dollar dropping to 91.92 yen.

The euro also fell, to 120.12 yen from 123.18 late Friday.

"Mr Kuroda's appointment would no doubt turn the BOJ policy to a much more accommodative stance," said Boris Schlossberg of BK Asset management.

"But the rally quickly fizzled ... as there was no official confirmation from the government and traders took quick profits on the run-up."

The British pound held steady near where it dropped following Friday's sovereign downgrade by Moody's, which stripped London of its coveted AAA rating.

That sent the pound down to $1.5131, and on Monday it slipped beneath the $1.51 line before pulling back to trade at $1.5162 at 2200 GMT.

The dollar meanwhile rose to 0.9318 Swiss francs, compared to 0.9290 francs on Friday.