The greenback declined against the euro on Wednesday as U.S. traders returned from the Christmas holiday and sold the greenback in line with an early retreat in the Dow and S&P 500, caused by concerns over sluggish sales in the Christmas period due to the credit crisis. The Dow ended the day flat with trading volume being relatively thin.

Euro rose to its highest in almost two weeks at 1.4506, benefiting from cross buying versus the Japanese yen and British pound (eur/jpy and eur/gbp rallied to 165.71 and 0.7314 respectively). The British pound dipped to 1.9768 in early Asian trading before rebounding to 1.9850 in U.S. session.

The Japanese yen remained under pressure on Wednesday as carry trade demand led to the Japanese currency being sold across the board, especially versus high yielders such as the Australian dollar. Usd/jpy retreated from 114.39 to 113.92 in Asia before rebounding to end the New York session at 114.35. The yen was trading just above the 7-week low at 114.49 made on Monday.