Investing.com - The U.S. dollar traded lower against its major counterparts Tuesday, as positive Greek news and increased euro zone sentiment sparked investors to embrace risk.
During U.S. morning trade, the dollar was lower against the euro, with EUR/USD up 0.41% to hit 1.3453.
Triggering the euro rally, German Chancellor, Angela Merkel won a parliamentary vote to provide Greek aid after the close of trading Monday.
Merkel warned policy makers that pushing Greece out of the euro zone risked “incalculable” damage.
However, Greece’s credit rating was slashed to selective default by Standard & Poors after the island nation negotiated the biggest national debt restructuring in history.
The European Central Bank will allocate cash from its long term refinancing fund tomorrow. It is expected to provide EUR470 billion of three year cash to help stabilize the euro zone.
Consumer sentiment is on the upswing in the euro zone region. An index of executive and consumer sentiment in the 17 nation group climbed for a second month in February to 94.4, beating analysts’ expectations of a gain to 94.
German consumer confidence is expected to increase to a 12 month high in March due to declining unemployment, according to GfK SE.
Meanwhile, in the U.S., durable goods orders plummeted 4%, whereas economists were expecting a 1% decline, adding to the single currency’s appeal.
However, another report showing that U.S. consumer confidence climbed to the highest level in a year during February, counteracted the bearish durable goods numbers.
A separate report showed that U.S. home prices fell more-than-expected in December, declining for the 18th consecutive month.
Euro sentiment remained supported as investors looked ahead to Wednesday's launch of the European Central Bank’s second three-year long-term refinancing operation, after a similar cash injection in December averted a credit crunch and eased pressure on euro zone bond markets.
In other news, Portugal’s finance minister said earlier that his country had passed the third review of its EUR78 billion bailout by the troika, which is composed of the ECB, EU and International Monetary Fund, and added that the country’s fiscal targets for 2012 would be met in spite of deteriorating domestic economic conditions.
The euro trimmed gains after Ireland’s prime minister confirmed that the country is to hold a referendum on the European Fiscal Compact Treaty, which proposes harsh new budgetary discipline on each euro zone state, including near-zero public deficits.
The greenback plunged against the pound with GBP/USD climbing 0.37 % to hit 1.5883.
Earlier Tuesday, the Confederation of British Industry reported that retail sale volumes in the U.K. improved significantly this month, after tumbling to the lowest level since March 2009 in January.
The greenback traded lower against the yen and against the Swiss franc, with USD/JPY falling 0.15% to hit 80.49 and USD/CHF giving back 0.40% to hit 0.8957.
The greenback was mixed against its Canadian, Australian and New Zealand counterparts, with USD/CAD shedding 0.25% to hit 0.9965 ,AUD/USD dipping 0.08% to hit 1.0749 and NZD/USD dropping 0.61% to hit 0.8359.
The dollar index, which tracks the performance of the greenback versus a basket of six other major currencies, lost 0.39% to hit 78.32.