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The dollar snapped back versus the yen Wednesday morning in New York after testing its lowest levels since 1995. Japanese officials recently hinted they may step in to prevent the soaring yen from rising much further, providing the dollar with a modicum of support.
Wednesday will see another light day on the economic front, with the markets likely looking to the EIA's weekly oil inventory report along with the results of the Treasury Department's $20.0 billion ten-year note offering.
Traders may also tweak their positions ahead of the unofficial start of earnings season, which begins with Alcoa reporting results after the close of trading.
The dollar held its ground near 1.4700 versus the euro after suffering steep losses earlier this week. Back in September, increased risk appetite led the dollar to a yearly low of 1.4843. Further gains in equities may drive the dollar back toward that mark by week's end.
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 remained range-bound versus the sterling, bouncing back and forth near 1.5900. While setting yearly lows versus a number of counterparts, the dollar has managed to hit a 4-month high against the badly slumping sterling amid lingering concerns about the fragile UK economy.
Still, consumer confidence in the UK improved to its highest level since April 2008 in September, as consumers' outlook on the economy for the next six months rose to a record-high.
Survey data released by the Nationwide Building Society showed Wednesday that the consumer confidence index rose to 71 from 65 in August.
The dollar dropped to a new 8-month low of 87.99 versus the yen, but recovered to 88.80 as stop-loss trades were triggered. A move below 87.08 will take the dollar to a nearly 14-year low.
Traders are looking for indications about how high officials in Tokyo will let the yen rise. Japanese exporters are hurt by a stronger yen, which makes their products more expensive to foreign markets.
Japan's leading index climbed to 83.3 in August from 82.5 in the previous month, the Cabinet Office said Wednesday. The indicator came in line with economists' expectations. The leading index has been rising now for six consecutive months.
The dollar plunged to yearly lows versus the resource-linked aussie and loonie on Tuesday, but managed to stabilize this morning.
Yesterday, the Reserve Bank of Australia shocked almost everybody in becoming the first G-20 nation to raise interest rates since the onset of the global economic meltdown last year.
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