Investing.com - Soft German sentiment data weakened the euro and bolstered the dollar on Tuesday, though concerns the Ukraine conflict could flare up anew softened the greenback against other major currencies throughout the trading session.
In U.S. trading on Tuesday, EUR/USD was down 0.11% at 1.3368.
The euro softened and the dollar rose after the ZEW Centre for Economic Research reported that its index of German economic sentiment dropped to 8.6 this month, down from 27.1 in July. It was the weakest reading in 20 months and came in well below economists’ forecasts of 18.2.
The current conditions index deteriorated to a seven-month low of 44.3 from 61.8 in July, worse than expectations for a decline to 55.5.
Geopolitical tensions in Eastern Europe are apparently taking their toll on the German economy.
Recent economic reports have indicated that sanctions slapped on Russia due to its alleged meddling in the Ukraine conflict are dragging on the German economy.
Germany is Russia’s largest trading partner in Europe.
The report also indicated that economic growth in Germany will be weaker than expected in 2014.
The ZEW data softened the euro by stoking expectations that monetary policy will tighten in the U.S., U.K. at a time while the European Central Bank may decide to loosen policy further to steer the euro area away from deflationary decline.
Still, the dollar saw headwinds of its own.
Russia has said it is wrapping up military exercises on its border with Ukraine and has added the country is working with the International Red Cross to send humanitarian aid to Ukraine.
Still, uncertainty over whether the ceasefire can last softened the greenback, as concerns began to brew that Russian trucks shipping aid into Ukraine may be used as a cover to smuggle in troops for combat missions.
The dollar was up against the yen, with USD/JPY up 0.04% at 102.23, and up against the Swiss franc, with USD/CHF up 0.10% at 0.9077.
The greenback was down against the pound, with GBP/USD up 0.15% at 1.6811.
The dollar was mixed against its counterparts in Canada, Australia and New Zealand, with USD/CAD down 0.02% at 1.0920, AUD/USD up 0.13% at 0.9275 and NZD/USD down 0.25% at 0.8436.
The US Dollar Index, which tracks the performance of the greenback versus a basket of six other major currencies, was up 0.06% at 81.56.