The dollar steadied against the euro and dipped versus the yen ahead of Christmas holidays in many markets, as investors juggled a heightened US security alert, economic expectations and intervention worries.
Tokyo markets were shut for a holiday on Tuesday and several countries begin Christmas holidays on Wednesday. But the recent downtrend for the dollar continued, following a heightened US security alert at the weekend, and persistent worries about the US ability to attract investment flows to cover its current account deficit.
"Security is an ongoing theme and we have seen some rise in risk aversion on the back of the security alert," said Mitul Kotecha, head of global foreign exchange research at Credit Agricole Indosuez.The dollar steadied at around $1.24 per euro compared with record lows of $1.2447 set on Monday, the US currency's 14th record low in 17 trading sessions.
The dollar eased 0.10 per cent against the yen to 107.40, just over half a yen above three-year lows set earlier this month.
Traders remain wary of yen-weakening intervention by the Japanese authorities during the thin holiday period, after Japan spent record amounts this year in order to curb the strength of the yen and protect the country's export-led recovery.
Sterling was steady against the dollar and the euro after data showing UK growth of an upwardly revised 0.8 percent in the third quarter but a widening in the current account deficit during the same quarter, to 8.1 billion pounds.
The US government raised its security alert on Sunday to orange, the second-highest level, saying there was a high risk of an attack in the holiday period.
Geopolitical tensions have weighed on the dollar for much of 2003 - before, during and after the Iraq war. The dollar is nearing the end of the year down more than 15 per cent against the euro and nearly 10 per cent against the yen.
European trade chief Mr Pascal Lamy said yesterday the euro's value was "not yet worrying" but it was essential that currency movements did not happen too fast.
Euro zone data showed investment capital flowed into the euro zone in October.
