The dollar steadied versus other majors Wednesday morning in New York as traders anxiously awaited the results of the US government's stress tests on banks and the a pivotal jobs report, both due later this week.
Risk appetite has risen over the past few weeks, hindering the safe haven dollar versus most of its major counterparts, particularly those linked with commodities. Metals and energy prices have jumped of late, with traders betting that a global economic recovery will spur demand.
Higher-yielding currencies such as the euro have also benefitted from risk appetite, while the sterling, which was crushed this year amid concerns about the UK banking sector, has also made a comeback against the dollar.
In economic news, Wednesday's release of Automatic Data Processing's (ADP) report on private sector employment in the month of April could shed some light on the strength of the Labor Department's monthly employment report.
Nonetheless, trading activity may be somewhat subdued ahead of the release of the results of the government's stress tests of the nation's largest financial firms on Thursday.
Rumor has it that 10 of the 19 largest US banks may be forced to boost their capital. Reports out this morning suggested that Bank of America (BAC) needs $34 billion in new capital.
In currency moves, the dollar was stable versus the euro Wednesday morning, holding near 1.3300 in chopping trading. Earlier in the week, the dollar hit a monthly low of 1.3436, hurt by gains in global equities. However, with the stock rally on Wall Street losing steam, the dollar may be positioned for a bit of upside if Friday's jobs reports proves as dismal as many economists fear.
Eurozone retail sales fell at its fastest pace on record in March as the worst global recession since the Second World War left millions unemployed, hurting the purchasing power.
Data released by the Eurostat showed Wednesday that retail sales fell a record 4.2% year-on-year in March. Economists had expected a 2.6% fall after a 4% decline in February.
The dollar managed to find its footing for the moment versus the sterling, improving to 1.5000 from yesterday's 4-month low of 1.5162. At its current level, the dollar has lost about 7 cents versus the sterling in the last week, moving further away from January's 23-year high of 1.3501.
Household confidence in the UK rose at the fastest pace in almost two years in April as global equity markets showed strong recovery and the country's housing market displayed some tentative signs of improvement, Nationwide Building Society said Wednesday. However, the National Institute of Economic and Social Research, said the British economy will contract the most since 1931.
The buck was also in a holding pattern versus the yen, having pulled back to 98.40 from its range near the century mark. A month ago, the dollar hit a multi-month high of 101.43, but has since leveled off.
Japanese markets remained closed for public holiday.
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