LONDON (MarketWatch) -- The U.S. dollar was mixed versus major rivals Wednesday, weighed down slightly by progress toward a $15 billion federal bailout for the nation's auto industry.
Congressional Democrats and the Bush administration reached an agreement in principle on a bailout plan late Tuesday. Line-by-line drafting of the proposed legislation continued late Wednesday night, The Wall Street Journal reported, citing an unnamed senior administration official and congressional aides. See full story.
According to the Journal, billions in short-term loans for the industry will be accompanied by a substantial government ownership stake and a direct role in the industry's restructuring, creating one of the most far-reaching government interventions in decades.
Prospects for a bailout buoyed U.S. stock index futures, said Naeem Wahid and Ashley Garvin, currency strategists at HBOS.
The rise in risk appetite is seen as a negative for the greenback, which, along with the Japanese yen, has traded closely in line with rising and falling levels of risk aversion in recent months.
The dollar index , a measure of the greenback against a trade-weighted basket of six currencies, was little changed at 85.817 in recent trade.
The euro was off 0.1% against the dollar to $1.2913, while the British pound was up 0.1% at $1.4762.
The dollar rose 0.4% against the Japanese currency to 92.65 yen. The greenback gained 0.2% against the Swiss unit to 1.2078 francs.
Meanwhile, the euro sank to a fresh low for the day after Italy's statistical agency reported the nation's economy had more sharply deteriorated than originally estimated in the third quarter.
Istat said Italian GDP shrank 0.5% in the third quarter, the largest fall since 1998. That follows a 0.4% drop in the second quarter. A recession is commonly defined as at least two consecutive quarters of shrinking GDP.
The downturn for the euro zone's third largest economy is expected only to intensify in the fourth quarter given a run of dismal industrial production data and activity surveys, leaving potential for a 1% quarterly fall in the October-December period, said Marco Valli, chief Italian economist at UniCredit MIB in Milan.
With a light data calendar in the U.S. and Europe, strategists said action could be choppy over the rest of the day.
"Fundamentals throughout the session will remain limited and as a result meaningful direction could also be in short supply with traders instead having to sit tight perhaps until we see the weekly jobless claims tomorrow or the U.S. retail sales figures on Friday before deciding where to move next," said James Hughes, strategist at CMC Markets.
