The dollar declined against major currencies Wednesday, losing ground as equity markets gained on hopes that China will undertake further stimulus measures to lift its economy.
The dollar indexwhich measures the currency against a trade-weighted basket of six global counterparts, stood at 88.959, down from 89.077 late Tuesday. It earlier had reached the highest level since April 2006.
The euro bought $1.2574, up from $1.2560. The British pound rebounded to fetch $1.4135, up from $1.4045.
"Expectations of an imminent Chinese stimulus package ... are also helping risk appetite," said Adam Cole, global head of foreign-exchange strategy at RBC Capital Markets. Such a package could be announced as early as Thursday, he said.
The Standard & Poor's 500 Index (SPX:
, , ) rose 1.5%.
The dollar's losses mounted after the ADP employment index tracking U.S. private-sector payrolls indicated a reduction of 697,000 jobs during February.
Still, the dollar notched a nearly four-month high versus the yen as traders focused on worries about the outlook for the Japanese economy.
The dollar traded as high as 99.47 yen, the highest since Nov. 4, and recently changed hands at 99.43 yen, up from 98.14 in North American trading late Tuesday.
Australian news
The dollar had more support earlier from safe-haven flows, said strategists at Brown Brothers Harriman.
The trigger for dollar gains, they told clients, came from "dismal" data that showed Australia's economy shrank for the first time in eight years during the fourth quarter.
The data "clouded the glimmer of optimism about the economy arising from yesterday's decision by the Reserve Bank to halt its series of rate cuts over recent months," the strategists said.
The economy shrank 0.5% in the fourth quarter from the prior three months, according to data released by the Australian Bureau of Statistics earlier Wednesday. Against the year-earlier quarter, gross domestic product expanded 0.3%. See full story.
The Australian dollar fell to 62.87 U.S. cents following the data but rebounded to trade at 64.40 cents, up 0.9% on the day.
The surprise decision by the Reserve Bank of Australia on Tuesday to hold its key interest rate steady had boosted the nation's currency and other higher-yielding counterparts, temporarily putting the greenback on the defensive. See rate story.
