NEW YORK (MarketWatch) -- The U.S. dollar fell on Tuesday, reaching a fresh 14-month low versus the euro, ignoring remarks by euro-zone officials the previous night expressing worries about the strength of the single currency.
The euro traded as high as $1.4994 versus the dollar in Asian trade but failed to break above the psychologically important $1.50 level. It changed hands in recent action at $1.4971, up from $1.4941 in North American activity late Monday.
The dollar index (DXY 75.27, -0.24, -0.32%) , a measure of the greenback against a trade-weighted basket of currencies, traded at 75.242, down from 75.373.
The dollar bought 90.40 Japanese yen, down from 90.67 yen on Monday.
The dollar fell further versus the yen but briefly pared losses against the euro after a pair of U.S. economic reports showed an unexpectedly large drop in wholesale prices and more sluggishness in the housing sector. See more on producer prices. See more on housing starts.
Euro-zone finance ministers meeting in Luxembourg Monday night repeated their support for the U.S. Treasury's self-professed strong-dollar policy. The euro has climbed 20% versus the dollar since March, making euro-zone exports more expensive to buyers outside the region.
Currency strategists, however, said there was little new in the rhetoric.
"European politicians will no doubt continue to air their concerns about currency 'misalignments,' although it must be said that beyond the familiar platitudes relating to the U.S. Treasury's strong dollar policy, it is unclear what the Eurogroup is prepared to do, if anything, to raise the ante," said Neil Mellor, currency strategist at Bank of New York Mellon, in a research note.
In an unscheduled appearance, European Central Bank President Jean-Claude Trichet told reporters at a news conference with finance ministers following the meeting that "excess volatility" in foreign exchange was "bad for economic development," echoing language from the most recent joint statement by the Group of Seven, Bloomberg reported. He also reiterated support for remarks by U.S. authorities in favor of a strong dollar.
Bank of Canada
The Canadian dollar dropped versus its U.S. counterpart after the Bank of Canada maintained its overnight rate target at 0.25% and reiterated a conditional commitment to hold the current policy rate until the end of the second quarter of 2010, as largely expected by analysts.
Policy makers also said "heightened volatility and persistent strength in the Canadian dollar are working to slow growth and subdue inflation pressures."
The current strength in the loonie is expected to more than fully offset the favorable developments in the economy since July, officials said in a statement.
The U.S. dollar jumped 1% to buy 1.0398 Canadian dollars in recent action.
Oil, Aussie dollar
Earlier, the weak dollar propelled crude-oil futures above $80 a barrel, a fresh one-year high as traders cheered upbeat prospects for energy demand. See Futures Movers.
The Australian dollar was in the currency spotlight, after minutes of the Reserve Bank of Australia's Oct. 6 meeting showed bank members said downside risks have "diminished significantly," making loose policy no longer necessary.
The Aussie dollar pared a brief spike to trade near 92.72 U.S. cents in recent action, up just 0.1% from Monday.
"There was little to suggest the board is about to start hiking in 50-basis-point clips in upcoming meetings," Sue Trinh, senior currency strategist at RBC Capital Markets said, in emailed comments. Australian dollar "appreciation was noted as helping to contain inflation, suggesting a measured approach in hiking."
The British pound bought $1.6470, up from $1.6370.
The Office for National Statistics on Tuesday said public sector net borrowing totaled slightly less than forecast but was the highest on record for the month.
Trading in the pound was subdued, however, ahead of a speech Tuesday night by Bank of England Governor Mervyn King. That's followed Wednesday by the release of the minutes of the October Monetary Policy Committee meeting.
Traders will watch both for clues regarding whether policy makers will be inclined to extend or pause the bank's 175 billion pound quantitative-easing program.
