The U.S. dollar gave up much of its earlier gains Wednesday as stocks got off to a modestly positive start on Wall Street, with investors looking beyond worries about the global economy, financial turmoil and the outlook for corporate earnings.
The greenback has tended to benefit as stocks slide, signaling less comfort among investors to take risk.
However, the dollar held the line on gains against the euro, which has dropped around 3% against the U.S. unit so far this week.
The euro changed hands at $1.3261, trimming earlier losses but still down from $1.3271 in late North American trading Tuesday.
The dollar index , which measures the greenback against a trade-weighted basket of six major currencies, stood at 85.244, up slightly from 85.233 late Tuesday.
Foreign-exchange traders awaited minutes from the Federal Reserve's last meeting on March 18, when policy makers expanded plans to buy mortgage-related securities -- and surprised markets by announcing it would purchase $300 billion in Treasurys over the next six months.
The minutes are due for release at 2 p.m. Eastern time.
The Federal Open Market Committee's minutes "will be closely scrutinized for further details on the quantitative easing discussion," analysts at RBC Capital Markets wrote in a note.
Quantitative easing regards measures taken by a central bank, after interest rates have been cut as much as possible, to increase the money supply in order to stimulate spending.
Dallas Fed chief's remarks undercut euro
Weakness in the euro-zone currency stemmed in part from remarks made by Dallas Federal Reserve Bank chief Richard Fisher, who reportedly said the euro faced bigger problems than the dollar.
Speaking in Tokyo, Fisher was quoted as saying Treasurys and other U.S. government debt "may well be judged more, rather than less, attractive" as investment alternatives "under most reasonable future scenarios." See full story.
Fisher's comments "helped put some downward pressure on the euro," said Kenneth Broux, an economist at Lloyds TSB.
Concerns about Ireland have also weighed on the euro, strategists said. The Irish government estimates its budget deficit will jump to 10.8% of gross domestic product this year in spite of emergency budget plans disclosed Wednesday to slash spending and increase taxes.
A sharply contracting economy, hit hard by the collapse of a housing bubble and turmoil in Ireland's outsized financial sector, is expected to shrink the formerly high-flying Celtic Tiger's economy by more than 8% this year.
"The threat is that the euro zone is only as strong as its weakest member," Broux said.
However, the euro registered little direct reaction to a steeper-than-expected February decline in German factory orders. The Federal Economics Ministry said Germany's orders fell a seasonally adjusted 3.5%, exceeding expectations by economists for a 2.7% decrease, according to Dow Jones Newswires.
A ken for yen
Also attracting buyers in Wednesday's currency action was the Japanese yen.
The dollar pared earlier losses to trade at 100.35 yen, from 100.64 yen in North American trade Tuesday.
The low-yielding yen has generally been even more sensitive than the greenback to shifts in investors' willingness to take on risk: Its gains have been outpacing other currencies during financial turmoil, and conversely its losses are usually marked when sentiment improves.
Also on traders' radar screens, currency strategists at HBOS said, will be first-quarter financial results, after aluminum giant Alcoa Inc. kicked off the latest earnings season late Tuesday with a wider-than-forecast loss.
The British pound, meanwhile, maintained its status as a proxy for overall risk appetite, Broux said.
Sterling lost ground versus the dollar as equities, particularly financial stocks, fell. The pound traded at $1.4718, down from $1.4742 late Tuesday.
