Italy is planning to raise around $2 billion by selling a US dollar-denominated three-year global bond later this week, banking sources said.

The bond will be priced at an yield around mid-swaps minus 13 basis points, sources said, adding bankers have already started taking orders for the bond.

Goldman Sachs, JP Morgan and Merrill Lynch are managing the bond issue.

He move comes against the backdrop of a series of cuts in US interest rates, making US funds cheaper for overseas borrowers.

The dollar, however, has gained since reaching a trough last month against the euro. As of May 9, the dollar was trading at $1.55 against the euro.

Financial advisers are keeping a close eye on the dollar's rally. The dollar has fallen so much, and it might stabilise, analysts say. 

Over the one-year period ended May 12, the dollar fell about 13 per cent against the euro as the US economy slowed down and the Fed slashed interest rates.

Italy is rated Aa2 by Moody's Investors Service, A+ by Standard & Poor's and AA- by Fitch Ratings.

Italy had issued a 10-year 4-billion euro ($6.3 billion) inflation-linked bond last week.

Data from the European Central Bank on its overnight loan facility showed banks borrowed 538 million euros from it on Monday, which rekindled fears about the banking sector hit by the credit crisis.

European banks hit a fresh two-month low, dragging broader indexes lower. This followed concerns about more asset writedowns at Swiss bank UBS whose shares have been falling sharply since Monday.