Investing.com - The dollar edged lower against most major currencies on Wednesday after an ECB official's comments downplaying deflationary pressures sparked demand for the euro, while Ukraine concerns boosted gold prices, which came at the dollar's expense.
Gold and the dollar tend to trade inversely with one another.
In U.S. trading on Wednesday, EUR/USD was up 0.33% at 1.3905.
The euro firmed after ECB executive board member Benoit Coeure said the monetary authority saw no indications of deflation in the euro area, though the risk of softer prices remains a possibility.
"We don't see deflation in the euro zone. We see it as a possible risk, and we have to be ready to act against the risk if it materializes," he said, and his comments firmed the euro by allaying expectations the ECB remains poised to cut rates or roll out fresh stimulus measures.
He added that the central bank has a number of policy measures at its disposal to address the issue.
The euro strengthened broadly after the ECB left interest rates at a record low 0.25% at its policy meeting last week and implemented no new policy measures to shore up growth despite forecasting low inflation for years to come.
Earlier Wednesday, data revealed that euro zone industrial production contracted 0.2% in January from a month earlier, dragged down by a 2.5% drop in energy output.
Analysts were expecting a 0.5% gain.
However, the underlying trend remained strong, with industrial output rising 2.1% on a year-over-year basis, beating expectations for a 1.9% gain.
Elsewhere, ongoing tensions in Ukraine bolstered gold's appeal as a hedge to geopolitical uncertainty on Wednesday, which softened the dollar.
Leaders of the Group of Seven largest industrial nations warned Russia on Wednesday not to annex Crimea.
In a joint statement, the leaders said Russian annexation of Crimea "could have grave implications for the legal order that protects the unity and sovereignty of all states."
Should Russia take the step, the G-7 said it would respond with further action "individually and collectively."
Ukraine’s interim Prime Minister Arseniy Yatsenyuk will meet with U.S. President Barack Obama later in the day, as diplomatic efforts to resolve the crisis continued.
Elsewhere, the dollar was down against the yen, with USD/JPY down 0.34% at 102.66, and down against the Swiss franc, with USD/CHF down 0.49% at 0.8739.
The greenback was flat against the pound, with GBP/USD unchanged at 1.6617.
The dollar was mixed against its cousins in Canada, Australia and New Zealand, with USD/CAD up 0.11% at 1.1118, AUD/USD up 0.11% at 0.8988 and NZD/USD down 0.07% at 0.8464.
The dollar index, which tracks the performance of the greenback versus a basket of six other major currencies, was down 0.23% at 79.70.