Investing.com - The dollar remains close to recent 12 year highs against the other major currencies on Wednesday, as a sustained rout in oil prices continued to fuel fears over disinflation, dampening risk sentiment.
Crude oil was hit after the World Bank cut its forecasts for global growth on Tuesday, adding to fears over the faltering economic recovery. Oil prices continued to tumble on Wednesday after falling to almost six year lows in the previous session, after OPEC said it will not cut output despite a global supply glut.
The rout in oil, which has halved in value in six months, has fuelled concerns of exacerbating already low levels of inflation in many major world economies.
EUR/USD hit 1.1727, the pair's lowest since November 2005 and was last at 1.1744, down 0.25% for the day after an interim ruling by the European Court of Justice cleared the way for the European Central Bank to implement quantitative easing measures.
The euro weakened further after the advocate general of the European Court of Justice, Pedro Cruz Villalon, advised judges to approve the ECB's Outright Monetary Transactions program, a measure which was launched in 2012.
Villalon said the ECB must avoid any "direct involvement in the financial assistance program that applies to the State concerned."
The ruling was seen as giving the ECB leeway at its upcoming policy meeting on January 22, when many expecte it to implement full blown QE measures.
Also Wednesday, data showed that euro zone industrial production rose 0.2% in November, in line with expectations, but factory output was down 0.4% on a year-over-year basis.
The dollar was lower against the yen, with USD/JPY down 0.85% to 116.91, holding just above one-month lows of 116.55 hit overnight.
The pound edged higher, with GBP/USD up 0.11% to 1.5175, while USD/CHF added 0.26% to trade at 1.0227.
The commodity-exposed Australian and New Zealand dollars were broadly weaker. AUD/USD slid 0.45% to 0.8130, while NZD/USD edged down 0.27% to 0.7717.
USD/CAD rose to fresh five-and-a-half year highs of 1.2017, before falling back to 1.1979, still up 0.20% for the day.
The U.S. dollar index, which measures the greenback’s strength against a trade-weighted basket of six major currencies, was up 0.10% at 92.54, not far from the 12-year peaks of 92.76 scaled last week.
Later in the day, the U.S. was to produce data on retail sales, in addition to reports on import prices and business inventories.