The greenback fell against 11 of its 16 major currency counterparts Wednesday before a report, expected to show an index of U.S. economic indicators, rose for a 4th consecutive month. The U.S Dollar traded near a 1-week low against the EUR on speculation economic data will add to signs the global recession is easing, prompting investors to seek higher-yielding assets. The Dollar changed hands at $1.4230 vs. the EUR down from $1.4127 yesterday.
The U.S. Dollar was supported in earlier trading by declining U.S. stocks, following Chinese markets, prompting investors to move toward assets perceived as less risky.
However, the Dollar weakened against the Japanese yen, although it came off the day's worst levels, as a sharp slide by China's stock market overnight raised concerns about the global economic outlook and boosted the Japanese currency's allure.
In recent months, the USD has tended to fall as stock prices and risk appetite rises, giving investors less impetus to buy dollars as a safe haven. In the absence of fresh economic data, currencies were mostly following stock prices for direction. Traders may see more volatility and choppy trades given that not much is happening in terms of events. So any correction to stock markets could be a key driver for the USD currency.