RTTNews - The dollar ran out of steam on Tuesday as stocks improved, fueling suspicions that the summer rally in equities may not have run its course.

Increased risk appetite had been hurting the dollar for most of the summer, but a brief drop in stocks had caused the dollar to rise off of its 2009 lows during the previous two sessions.

However, the buck appears back on the defensive, particularly against the higher-yielding euro and sterling.

Traders considered a pair of key economic reports, including data showing that housing starts showed an unexpected decrease in the month of July.

The report showed that housing starts fell 1.0 percent to an annual rate of 581,000 in July from the revised June estimate of 587,000. Economists had expected starts to rise to 598,000 from the 582,000 originally reported for the previous month.

Meanwhile, wholesale prices fell much more sharply than expected last month, led by a slide in gasoline prices. The report keeps inflation concerns on the back burner. The data suggest that the recession continues to weigh on prices.

The U.S. Labor Department revealed that producer prices dropped 0.9 percent in July. This followed an advance of 1.8 percent in the previous month.

The dollar dropped sharply versus the sterling, slipping to 1.6580 from yesterday's monthly high near 1.6300. With the retreat, the dollar moved back toward a 10-month low of 1.7012, set earlier this month.

UK annual inflation stayed below the central bank's 2% target for the second straight month in July.

According to a report released by the Office for National Statistics on Tuesday, annual inflation unexpectedly stood at 1.8% in July, the same as in June, which was the lowest since September 2007.

Versus the euro, the dollar eased to 1.4140 from a 3-week high near 1.4050.

German economic sentiment improved in August rebounding from a fall in July as the surprising economic recovery in the second quarter boosted financial market experts' confidence, a closely watched report revealed Tuesday.

The dollar held its ground versus the yen, staying near 94.70 on Tuesday. Yesterday, the dollar hit a 4-week low of 94.19.

The Cabinet Office of Japan in a final report revised upward the leading and coincident indices for June.

The leading index stood at 79.9 in June, revised up from 79.8 estimated on August 6, and was also higher than the reading of 76.9 in May. The index came in line with economists' estimates. The index has now increased for the fourth consecutive month in June.

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