The US dollar advanced slightly versus the EUR and JPY Wednesday after U.S economic data showed a bigger-than-forecasted drop in housing starts. A decline was expected due to the expiration of a federal tax break for home buyers.
The return of risk aversion was also supported by reports that Spain may also seek financial aid, resurfacing concerns regarding the euro zone debt crisis. The USD's appreciation versus the euro continued during today's early Asian trading as well.
However, the USD's rally was modest as better-than-expected U.S. manufacturing data returned some optimism to investors as it signaled that the global economy is recovering despite the crisis in the euro zone. Riskier currencies such as the Australian dollar benefited from the news.
Looking ahead to today, another exciting news day is expected with the release of the CPI data and unemployment claims at 12:30 GMT and the Philly Fed Manufacturing Index at 14:00 GMT.