The dollar rebounded from its 14-month low against a basket of currencies on Tuesday as the softer-than-expected housing data dented investors' risk appetite. A report showed that new U.S. housing starts rose 0.5% to an annual rate of 590,000 units in September, compared to economists forecast of 610,000 units. August's figure was revised down to 587,000. A separate report stated that the producer price index dropped 0.6% last month with consensus expectation of holding steady. The data sent higher-yielding currencies such as Australian dollar and New Zealand dollar lower to 0.9181 and 0.7440 respectively.

Euro hit a 14-month high at 1.4994 against the dollar in Asian session. However, options-related selling kept euro from pushing above 1.5000 level partly due to comments from a top adviser to French President Nicolas Sarkozy that a euro at $1.50 is a disaster for European industry and the economy. The single currency then dropped sharply to 1.4883 in New York morning before recovering.

The British pound declined after hitting a 4-month high at 1.6490 versus the dollar on Tuesday. Although the better-than-expected UK public finances has lifted cable from 1.6352 to said high, the pair tumbled to 1.6329 in New York morning with traders citing news that Qatar was selling 379.2 million Barclays shares. In addition, Bank of England Governor Mervyn King said in late New York session that Britain is likely to return to positive growth in the second half of this year but the road to recovery will not be smooth. Sterling then dropped to near a session low before rebounding on short-covering as traders are awaiting for the release of minutes of the central bank's October meeting on Wednesday for any clue on the 175 asset purchase programme.

The greenback rallied from 1.0267 to 1.0528 against the Canadian dollar after Bank of Canada said that the recent strength of loonie is expected to offset the recovery of the Canadian economy and it reiterated to keep its overnight interest rate at 0.25% through mid-2010.

Data to be released on Wednesday include Westpac leading economic index in Australia, BoE minutes and CBI industrial trend in U.K., Fed's Beige book in U.S..