Investors resumed selling the dollar Wednesday, pushing the currency to another 15-year low against the yen, after the Federal Reserve released a survey showing mostly modest growth in the U.S. economy.
Investors expect that the Fed will act to boost the sluggish U.S. economy as early as the first week in November. The Fed released a survey of regional economic activity that supported policymakers' case for more relief, said TD Bank economist Alistair Bentley in a research note. The snapshot of the U.S. economy showed that growth remained too modest in most of the country to bring down the unemployment rate, which is currently 9.6 percent.
The Fed is expected to announce a plan to purchase bonds in large quantities at its next meeting Nov. 2-3. That would drive interest rates lower, perhaps helping fuel borrowing and spending, but also drag on the dollar's value.
In late trading in New York Wednesday, the euro rose to $1.3961 from $1.3744 late Tuesday. The euro hit its highest point since January last Friday at $1.4157.
The dollar had shot higher Tuesday after China's central bank raised a key interest rate for the first time since 2007 in an effort to keep the country's economy from overheating. That spooked investors, who were afraid a slowdown in the world's No. 2 economy would hurt a global economic recovery. Those fears briefly revived demand for the dollar, which is traditionally perceived as a safe haven.
Tuesday's gain was a rare one in recent trading for the dollar, which has been steadily declining since late August. Ever since Federal Reserve Chairman Ben Bernanke hinted that the central bank was ready to act further to support the economy on Aug. 27, a broad measure of the dollar's value versus six currencies has dropped 7 percent.
On Wednesday, the dollar also fell steeply against the other currencies it had shot up against on Tuesday. The British pound climbed to $1.5855 from $1.5699. The dollar hit a new 15-year low at 80.85 Japanese yen, before bouncing back to 81.15 yen, still down from 81.46 yen late Tuesday.
The pound rose after the U.K. Treasury said the British government said it will make huge cuts to public spending to pare the country's deficit.
In other trading, the dollar dropped to 1.0226 Canadian dollars from 1.0339 Canadian dollars and slid to 0.9631 Swiss francs from 0.9702 Swiss francs.
The U.S. currency also receded versus the Australian and New Zealand dollars, the Scandinavian currencies and the Brazilian real and Mexican peso.