The dollar declined against higher-yielding currencies Wednesday afternoon, after data showed producer prices in February posted their biggest fall in seven months, raising doubts about the U.S. economy and causing investors to reduce exposure to risk. As a result, the Australian dollar hit a nearly two-month high against the greenback, while the Canadian currency moved closer to parity against the dollar, which dipped as low as C$1.0070, a 20-month low. The New Zealand dollar jumped as much as 1%, before relinquishing some of the gains.
The greenback also remained under selling pressure on Wednesday after the U.S. Federal Reserve held its pledge to keep interest rates low for an extended period, prompting investors to snap up growth-sensitive assets. Low interest rates make the dollar less attractive to investors than higher-yielding currencies, stocks and commodities. In addition, the economic recovery does not appear to be improving at the speed many investors were hoping for, and currencies appear to be tracing the movement of stocks as a result.
Looking ahead to today, there are several news releases coming out of the U.S. These include the Core CPI, Unemployment Claims and Philly Fed Manufacturing Index. Better-than-expected results may help the Dollar recover some of yesterday's losses against some of its crosses such as the AUD and CAD. On the other hand, if the results turn out to be lower than forecast, then the Dollar may record a fairly bearish session in today's trading. Traders should pay close attention to the market as there is an opportunity for traders to capitalize on the fluctuations which are likely to follow these releases.