The US dollar rose after the U.S. economy contracted by one percent in the second quarter showing signs of stabilization, easing the market's overall risk aversion. Meanwhile, jobless claims totaled 570,000, more than expected. The market is relying on the labor market to bring the economy back and job creation remains slow. US stocks fell, hurt by energy producers as crude oil tumbled for a third day.
The Japanese yen gained as falling U.S. stocks increased demand for currency safety.
The euro softened after European retail sales fell in August as rising unemployment curbed consumer spending. The Eurozone jobless rate rose to a 10-year high of 9.4 percent and may reach 11.5 percent in 2010. The economy is expected to return to growth in the middle of 2010 after contracting close to 4.6 percent this year.
The British pound was knocked lower after both weaker than expected business investment and consumer spending provided evidence the UK is still in recession mode. Thus, UK interest rates will stay low to restore the economy. Business investment fell 10.4 percent in the second quarter, the most in 24 years. Spending fell 18.4 percent, the most since 2006. Meanwhile, the average cost of a UK home rose 1.6 percent in August, the most since December 2006. Despite some positive news, the Bank of England extended its asset-purchase program on August 6, indicating that the recession is deeper than expected.
The Canadian dollar is trading steady after giving back gains as crude oil and stocks fell. Crude oil prices fell below $70 a barrel, which hurt the loonie as it is Canada's key export.
The Australian and New Zealand dollar fell for the third day against the US dollar on concerns of investment restrictions in China. China said it may limit the capacity of industries such as steel and cement, igniting concern the global recovery will slow. Australia is a major exporter of steel to China. If China slows down, it would pressure the global economy and reduce the demand for riskier assets. On an upbeat note, Australia's business investment figure unexpectedly rose in the second quarter. Losses in the New Zealand dollar was capped after the nation reported its smallest annual trade deficit in six years as exports rose.