Investing.com - The dollar softened against the world's major currencies on Tuesday on better-than-expected trade data.
Investors continued to avoid the greenback ahead of the Federal Reserve's last monetary policy meeting of the year, as expectations continued to build the Fed will keep policy loose.
In U.S. trading on Tuesday, EUR/USD was up 0.49% at 1.3004.
The U.S. Federal Reserve is holding its last monetary policy meeting of the year, and market participants are expecting the U.S. central bank to either stick with current loose policies or possibly loosen them even further.
The U.S. Federal Reserve is currently running a third round of quantitative easing, a monetary stimulus tool that sees the U.S. central bank buy USD40 billion in mortgage-backed securities a month from banks on an open-ended basis to spur recovery.
Such policy tools weaken the greenback.
The Fed is also running it so-called Operation Twist program, under which the Fed swaps USD45 billion a month in short-term Treasury holdings for long-termer U.S. government debt.
Unlike quantitative easing, Operation Twist does not expand the Fed's balance sheet.
Operation Twist is due to expire this month, and some market participants avoided the dollar on talk the Fed may let the program end and replace it with even more quantitative easing, which weakened the greenback.
Meanwhile, the euro and other higher-yielding currencies strengthened against the dollar on news that the ZEW index of German economic sentiment rose by 22.6 points to 6.9 in December from a reading of -15.7 in November and the first positive showing since May.
Analysts were expecting a -12.0 reading.
U.S. trade data, meanwhile, further stoked demand for risk-on assets, which came at the greenback's expense.
In the U.S. earlier, the Commerce Department reported that the U.S. trade deficit expanded less than expected in October, hitting USD42.2 billion compared to a USD40.3 billion deficit in September.
While the numbers still reflected a weak global economy due to lackluster imports and exports, the data beat expectations for the trade deficit to expand to USD42.6 billion in October.
The greenback, meanwhile, was down against the pound, with GBP/USD trading up 0.22% at 1.6110.
The dollar was up against the yen, with USD/JPY trading up 0.23% at 82.54 and down against the Swiss franc, with USD/CHF trading down 0.12% at 0.9324.
The dollar was mixed against its cousins in Canada, Australia and New Zealand, with USD/CAD unchanged at 0.9863, AUD/USD up 0.36% at 1.0526 and NZD/USD trading up 0.48% at 0.8389.
The dollar index, which tracks the performance of the greenback versus a basket of six other major currencies, was down 0.34% at 80.18.
In the U.S. on Wednesday, the Federal Reserve is to announce its latest decision on interest rates.
Fed Chairman Ben Bernanke will hold a press conference afterwards.
The U.S. is also to release official data on import prices and crude oil inventories.
Investors continued to avoid the greenback ahead of the Federal Reserve's last monetary policy meeting of the year, as expectations continued to build the Fed will keep policy loose.
In U.S. trading on Tuesday, EUR/USD was up 0.49% at 1.3004.
The U.S. Federal Reserve is holding its last monetary policy meeting of the year, and market participants are expecting the U.S. central bank to either stick with current loose policies or possibly loosen them even further.
The U.S. Federal Reserve is currently running a third round of quantitative easing, a monetary stimulus tool that sees the U.S. central bank buy USD40 billion in mortgage-backed securities a month from banks on an open-ended basis to spur recovery.
Such policy tools weaken the greenback.
The Fed is also running it so-called Operation Twist program, under which the Fed swaps USD45 billion a month in short-term Treasury holdings for long-termer U.S. government debt.
Unlike quantitative easing, Operation Twist does not expand the Fed's balance sheet.
Operation Twist is due to expire this month, and some market participants avoided the dollar on talk the Fed may let the program end and replace it with even more quantitative easing, which weakened the greenback.
Meanwhile, the euro and other higher-yielding currencies strengthened against the dollar on news that the ZEW index of German economic sentiment rose by 22.6 points to 6.9 in December from a reading of -15.7 in November and the first positive showing since May.
Analysts were expecting a -12.0 reading.
U.S. trade data, meanwhile, further stoked demand for risk-on assets, which came at the greenback's expense.
In the U.S. earlier, the Commerce Department reported that the U.S. trade deficit expanded less than expected in October, hitting USD42.2 billion compared to a USD40.3 billion deficit in September.
While the numbers still reflected a weak global economy due to lackluster imports and exports, the data beat expectations for the trade deficit to expand to USD42.6 billion in October.
The greenback, meanwhile, was down against the pound, with GBP/USD trading up 0.22% at 1.6110.
The dollar was up against the yen, with USD/JPY trading up 0.23% at 82.54 and down against the Swiss franc, with USD/CHF trading down 0.12% at 0.9324.
The dollar was mixed against its cousins in Canada, Australia and New Zealand, with USD/CAD unchanged at 0.9863, AUD/USD up 0.36% at 1.0526 and NZD/USD trading up 0.48% at 0.8389.
The dollar index, which tracks the performance of the greenback versus a basket of six other major currencies, was down 0.34% at 80.18.
In the U.S. on Wednesday, the Federal Reserve is to announce its latest decision on interest rates.
Fed Chairman Ben Bernanke will hold a press conference afterwards.
The U.S. is also to release official data on import prices and crude oil inventories.