RTTNews - The dollar firmed up a bit versus other major currencies Wednesday morning in New York amid speculation that its recent plunge may have been overdone.
Green shoots on the economic horizon and increased risk appetite have led traders to buy higher-yielding currencies like the euro and sterling of late, while rising commodities prices have bolstered resource-linked currencies such as Canada's loonie.
Over the past few weeks, the dollar has wiped out its gains from earlier in the year, slipping to levels not seen since last fall versus most majors.
The dollar improved to 1.4200 versus the euro after hitting a fresh 5-month low of 1.4338 overnight. Since mid-May, the buck has dropped almost 10 cents.
Wednesday, a first estimate released by the Eurostat showed that the euro area contracted 2.5% in the first quarter from the fourth quarter. This was the largest decline since records began in 1995. The statistical office confirmed the initial estimate for the first quarter. The decline in the fourth quarter was 1.8%.
Against the resurgent sterling, the dollar rebounded to 1.6500, an improvement from a 6-month low of 1.6656, set overnight. Back in January, the dollar hit a 23-year high of 1.3501, but has since fallen sharply on indications the British financial system is stable.
British consumer confidence rose to a six-month high in May on expectations that the economy may recover from the recession, a closely watched survey revealed Wednesday.
The dollar continued its run of choppy trading versus the yen Wednesday morning, holding near 96. The pair has shown a lack of direction for the past few weeks, with traders expressing interest in riskier assets.
Trading on Wednesday is likely to be impacted by private payroll processor ADP's employment data, the Institute for Supply Management's report on activity in the service sector and factory orders data from the Commerce Department, all covering the month of May.
Bond market players will also look to another quantitative easing move from the Federal Reserve Wednesday morning. The New York arm of the Fed will purchase treasuries set to mature between May of 2016 and May of 2019. The buyback is set to begin at 10:15 a.m. ET.
Traders will also look to testimony from Federal Reserve Chief Ben Bernanke, who is scheduled to testify before the House Budget Committee in Washington on the current economic climate. The testimony is set to begin at 10:00 a.m. ET.
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