The dollar steadied against the euro and hovered in a narrow band against the yen today as investors debated whether a swift US recovery would be enough to lift the greenback out of its recent downtrend.
The dollar fell sharply against the euro in yesterday's New York session as Wall Street stocks stumbled and concern grew that higher long-term US borrowing rates may undercut a budding economic recovery.
Ten-year Treasury yields soared to one-year highs yesterday, undermined both by stronger-than-expected US retail sales data and heavy selling of bonds issued by US mortgage agencies, particularly Fannie Mae.
"US numbers are coming in strong which should support the dollar, but yesterday the sell-off in Treasuries unnerved Wall Street and this weighed on the dollar," said Mr Lee Ferridge, head of global currency strategy at Rabobank.
The euro stood at $1.1315 in early European trade, little changed from the New York close but up a cent from Wednesday's lows. The euro hit record highs above $1.1930 in May and brushed this peak again in June.
The euro showed little reaction to data showing the German economy contracted for a second consecutive quarter, marking the second time in two years Europe's biggest economy has entered recession.