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The dollar steadied on Wednesday as traders bet its recent drubbing may have been overdone. Amid signs that the global economy is in recovery mode, the dollar plunged earlier this week, hitting a yearly low versus a basket of major counterparts.
While today's advance may be seen as a stabilization of sorts, many analysts are predicting that the dollar will continue to plummet as long as the Federal Reserve seems hesitant to raise interest rates.
The interest rate gap between the dollar and another G-20 nation widened for the first time since the onset of the global economic crisis Tuesday, as Australia shocked just about everybody by raising their key overnight call rate by 25 basis points to 3.25 percent.
The dollar rose to 1.4672 against the euro, staying away from September's yearly low of 1.4843.
The Eurozone economy contracted more than initially estimated in the second quarter, putting pressure on the European Central Bank to continue its policy stimulus until the economy gains sustainable growth. But, the pace of decline eased from the first quarter.
Gross domestic product or GDP fell 0.2% sequentially in the second quarter, a downward revision from the 0.1% decline estimated previously, data released by the Eurostat showed.
The European Central Bank is expected to hold steady on its key interest rate of 1 percent on Thursday.
The dollar also gained on the yen, improving to 89 after coming close to a 1995 low of 87.08 on Tuesday.
Meanwhile, the dollar remained stuck in the mud versus the equally unfashionable sterling, holding near 1.5900. The Bank of England is also expected to maintain its extraordinarily low interest rate tomorrow.
Wednesday evening may see some dollar movement as traders tweak their positions following the unofficial start of earnings season, which begins with Alcoa reporting results after the closing bell on Wall Street.
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