WASHINGTON (dpa-AFX) - The dollar battled back from overnight losses versus the euro Wednesday morning, after the European Central Bank offered a massive loan to 523 euro-area banks in a massive funding operation.
The ECB alloted EUR 489.191 billion in three-year loans to banks in its long term refinancing operation. The figure exceeded economists' expectations for allotment up to EUR 300 billion.
Traders reacted to a flood of economic news from Europe and Asia, ahead of this morning's existing home sales report from the U.S.
The dollar dropped as far as $1.3198 versus the euro, before clawing back to $1.3075 by 7 am ET. A week ago the dollar hit an 11-month high of $1.2944.
The Italian economy contracted in the third quarter mainly led by a fall in domestic demand and investment, and likely entered a recession triggered by the Eurozone's deepening debt crisis, the latest official figures revealed Wednesday.
The seasonally and calendar adjusted gross domestic product declined 0.2 percent sequentially in the third quarter, in line with economists' forecast. It was the first contraction in economic activity since the fourth quarter of 2009. In the second quarter, the economy expanded 0.3 percent quarter-on-quarter.
The dollar remained range-bound versus the yen, holding just below Y78.
The Bank of Japan lowered its assessment of the economy for a second consecutive month at its rate-setting meeting on Wednesday, citing negative impacts from the ongoing debt turmoil in Europe and the appreciation of yen
The Japanese government retained its assessment that the economy is picking up slowly, but said confidence among businesses has deteriorated.
The buck slipped to a 2-week low of $1.5773 versus the sterling, then steadied near $1.57.
The Bank of England's policymaking body was unanimous in deciding to maintain status quo in December, the minutes of the final rate-setting session of the year revealed Wednesday.
The nine-member Monetary Policy Committee, led by Governor Mervyn King, left the size of bond purchases unchanged at GBP 275 billion and kept the key interest rate at 0.50 percent at the end of the two-day meeting held on December 7 and 8.
Looking at today's economic calendar from the U.S. the National Association of Realtors is scheduled to release its report on existing home sales for November at 10 am ET.
Economists estimate existing home sales of 5.08 million units for the month compared to a seasonally adjusted rate of 4.90 million units in October.
U.S. mortgage applications fell slightly last week, as purchase demand remain subdued despite low interest rates, closely watched industry figures revealed Wednesday.
The Mortgage Bankers Association said its seasonally adjusted index of mortgage application activity, slipped 2.6 percent in the week ended December 16, after rising 4.1 percent the previous week.
Copyright RTT News/dpa-AFX