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Euro bounces above $1.33 on Italy exit polls

The European single currency jumped above $1.33 on Monday as exit polls appeared to indicate that Italy's centre-left was poised to win against Silvio Berlusconi in a key election for the eurozone.

At about 1300 GMT, the euro rallied to $1.3319 but later pulled back to stand at $1.3281. That compared with $1.3189 late in New York on Friday.

"Exit polls are showing that the market's worse case scenario could be avoided in that Bersani may have won a majority in the Senate," said Rabobank analyst Jane Foley.

The main Democratic Party led by Pier Luigi Bersani and its smaller leftist allies were ahead with between 34.5 and 37 percent, beating the 29 to 31 percent for a coalition led by the former prime minister Berlusconi, exit polls showed.

"The first exit polls [which were prohibited up until late afternoon today] showed that the centre left is leading in the Italian election with market favourite and budget reform-minded Bersani winning around 37 percent of the vote," added ETX Capital trader Joe Rundle.

"Berlusconi has failed to close the gap, with the poll suggesting he has 31 percent of the vote."

Billionaire and three-time prime minister Berlusconi, 76, had waged a populist campaign, blaming the Germans for Italy's economic woes and promising to refund an unpopular property tax to Italians.

Bersani had meanwhile pledged to continue with budget discipline if he won the election, to the delight of financial markets.

"Insofar as Bersani has pledged to continue with the reforms laid out by Monti, markets are viewing a Bersani-led government as the best prospect. A more optimal prospect would a coalition with Monti appointing finance minister," added Foley. research director Kathleen Brooks agreed that indications of a Bersani win were boosting the euro.

"This is euro positive in the short term as it reduces the 'Berlusconi' risk for now," she told AFP.

"However, it could be a volatile day or two ... as the market digests exactly who is in power and what the results mean in terms of Italy's commitment to economic and fiscal reform -- and also its commitment to the entire eurozone project.

"The initial results appear to be market positive, but we don't think we are out of the woods yet when it comes to Italian political risks."

The newcomer Five Star Movement led by former-comedian-turned-activist Beppe Grillo, who has channelled growing disenchantment with traditional politicians and rising social discontent, was given around 20 percent in the exit polls.

Outgoing prime minister Mario Monti was slated for fourth place, with only around 10 percent of the vote. A lacklustre turnout meanwhile reflected widespread frustration among voters fed up with austerity cuts and a grinding recession.