Forexpros – The U.S. dollar remained mixed to lower against its major counterparts on Wednesday, as comments by European Central Bank policymaker Ewald Nowotny supported sentiment, although concerns over the debt crisis in the euro zone continued to linger.
During European afternoon trade, the dollar was lower against the euro, with EUR/USD climbing 0.59 % to hit 1.2133.
The euro strengthened broadly after ECB Governing Council member Nowotny said that there were some arguments in favor of giving the euro zone’s bailout fund, the European Stability Mechanism, a banking license, which would increase its firepower to fight the debt crisis in the euro zone.
But investors remained cautious as the yield on Spanish 10-year government bonds remained above the 7.50% level, beyond the 7% threshold widely considered unsustainable in the long run, fuelling concerns that a full-scale sovereign bailout is inevitable.
Meanwhile, weak economic data out of German and the U.K. indicated that Europe’s largest economies are being affected by the debt crisis in the region.
The German research institute Ifo said its Business Climate Index fell to 103.3 in July, the lowest level since June 2010, from a reading of 105.2 in June.
In the U.K., official data showed that the U.K. economy contracted the most since the first quarter of 2009 in the three months to June.
The Office for National Statistics said gross domestic product contracted by 0.7% in the second quarter, far more than the 0.2% contraction economists had forecast, extending Britain’s recession into a third quarter.
Following the data, the greenback edged higher against the pound, with GBP/USD easing 0.10% to hit 1.5493.
Elsewhere, the greenback edged up against the yen, with USD/JPY adding 0.11% to hit 78.26, but dropped against the Swiss franc, with USD/CHF declining 0.62% to trade at 0.9896.
The yen remained under pressure after Bank of Japan policymaker Hirhide Yamaguchi said earlier that the central bank will ease monetary policy further if the yen’s rise severely threatens Japan’s path towards a moderate economic recovery.
Meanwhile, government data showed that Japan’s trade deficit narrowed more-than-expected in June, narrowing to JPY0.30 trillion from a deficit of JPY0.62 trillion the previous month.
The greenback was lower against its Canadian, Australian and New Zealand counterparts, with USD/CAD falling 0.36% to 1.0185, AUD/USD climbing 0.68% to 1.0289 and NZD/USD rising 0.35% to trade at 0.7873.
In New Zealand, official data showed that the trade surplus widened unexpectedly in June, rising to NZD331 million from a surplus of NZD232 million the previous month.
Meanwhile, official data showed that consumer price inflation in Australia rose 0.5% in the second quarter, disappointing expectations for a 0.6% increase and following a 0.1% rise the previous quarter.
The dollar index, which tracks the performance of the greenback versus a basket of six other major currencies, was down 0.32% to trade at 83.81.
Later in the day, the U.S. was to release official data on new home sales, as well as a report on crude oil stockpiles.
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