The dollar index (DXY 76.32, -0.22, -0.29%) , a measure of the greenback against a trade-weighted basket of major currencies, fell to a fresh one-year low around 76.20 in early London trade. It traded at 76.323 in recent action.The dollar fell to 90.37 yen versus the Japanese currency, down from 91.07 yen Tuesday.
Incoming Japanese Finance Minister Hirohisa Fujii was quoted Wednesday as saying he was opposed to intervention in currency markets as long as moves are gradual. See related story.
"I don't think they are fluctuating rapidly now," Fujii told reporters, according to Reuters.
The remarks echoed views expressed by Fujii earlier this month, when he said the government should only take action when the yen makes abnormal moves, analysts said.
"The tone of the new government with respect to the yen has limited the fear in the market with respect to the potential for intervention against yen strength," said Jane Foley, director of research at Forex.com.
Meanwhile, the yen's gains have underscored traders' preference for the U.S. dollar as a funding currency for carry trades, she said.
Carry trades consist of borrowing in a low-yielding currency, then purchasing assets denominated in higher-yielding currencies.
The dollar is also saddled with pressure as a result of low interest rates, a large budget deficit, weak current account and expectations for no rate hikes by the Federal Reserve until mid-2010, Foley said.
Warnings Wednesday by Fed Chairman Ben Bernanke and Bank of England Governor Mervyn King over the weakness of any economic recovery reinforces concerns the global economy isn't out of the woods, she said.
Renewed worries about the global economic outlook could trigger a drop in investors' appetite for risk, sinking equities and providing a boost for the dollar, Foley said.
But for now, Bernanke's Tuesday remarks appeared to be fueling a positive tone in equity markets. Bernanke said the U.S. recession, at least from a technical standpoint, was likely over. Read Indications.
The euro traded at $1.4667, little changed from $1.4671 Tuesday afternoon.
The British pound changed hands at $1.6506, up barely from $1.6498.
U.S. economic data on the schedule Wednesday includes August consumer prices at 8:30 a.m. Eastern, followed by industrial production at 9:15 a.m. The NAHB housing market survey for September at is set for release at 1 p.m.
