Dollar Turns Weak Against Major Counterparts

(RTTNews) - The U.S. dollar rose to a fresh 20-year high in the European session on Wednesday, hitting a 24-year peak against the Japanese currency.

The dollar soared to its highest level since 1985 against Pound Sterling.

However, after its strong uptick amid rising fears about a global recession, the dollar pared some gains, and the dollar index even slipped into negative territory.

The Federal Reserve's Beige Book said economic activity in the U.S. has been essentially unchanged since early July.

The Beige Book, a compilation of anecdotal evidence on economic conditions in each of the twelve Fed districts, noted five districts reported slight to modest growth in activity and five others reported slight to modest softening.

With regard to inflation, the Fed said prices remained highly elevated, with substantial price increases reported across all districts, particularly for food, rent, utilities, and hospitality services.

However, the report noted nine districts reported some degree of moderation in rate of price growth in recent months.

Data from the Commerce Department showed U.S. trade deficit narrowed significantly in the month of July, shrinking to $70.6 billion from $80.9 billion in June. Economists had expected the trade deficit to narrow to $70.3 billion from the $79.6 billion originally reported for the previous month.

The dollar index, which climbed to 110.79, dropped to 109.54, down more than 0.6% from the previous close.

Against the Euro, the dollar firmed to $0.9877 before paring gains and weakening to $1.0008. The European Central Bank, which is scheduled to announce its policy on Thursday, is widely expected to hike interest rates by 75 basis points to take record-high inflation.

The dollar firmed to $1.1405 against Pound Sterling, but eased to $1.1528 later in the session, netting a marginal loss.

The dollar strengthened to 144.99 yen in early New York session, but retreated to 143.84, still holding well above Tuesday's close of 142.79 yen.

Against Swiss franc, the dollar weakened to CHF 0.9768. The Aussie firmed to US$0.6768.

The dollar shed ground against the Loonie, dropping to C$1.3114 after the Bank of Canada hiked its rates by 75 basis points. Oil's sharp fall helped limit dollar's downside.

The Bank of Canada today hiked its interest rates by 75 basis points to a 14-year high, and said the policy rate would need to go higher still given the fight against raging inflation.

The 75 basis point rate hike marks the fifth straight increase in interest rates by the Bank of Canada and follows a 100 basis point rate hike in July.