The euro hit a fresh nine-month low against the dollar on Wednesday after Italy said it fell into recession again in the second quarter, June German industrial performance slumped and investors grew more cautious over the conflict in Ukraine.
The dollar reached an 11-month high against a basket of major currencies, boosted by a move by investors away from currencies seen as higher-risk, amid reports Russian troops had gathered on the Ukrainian border.
Around 20,000 Russian troops massed on Ukraine's eastern frontier were creating a "dangerous situation", NATO said on Wednesday. It warned that Moscow could use humanitarian concerns as a pretext to send troops across the border.
That, as well as the data showing Italy's economy unexpectedly shrank in the second quarter, drove the euro to near $1.33, its lowest since early November before it recovered to trade shy of $1.34.
"All of this is adding to the headwinds of an already weak recovery in the euro zone, encouraging bets on more aggressive European Central Bank easing, weighing on the euro," said Valentin Marinov, head of European G10 currency strategy at Citigroup.
Currencies
The dollar index surged to a peak of 81.637, its highest since early September, then trimmed those gains.
German industrial orders fell at their steepest rate in almost three years in June. One reason seemed to be companies becoming more cautious about taking on contracts as geopolitical tension escalated. Another was weaker euro zone demand.
The European Central Bank will hold its next rate policy meeting on Thursday.
Tied into the euro's weakness in recent weeks has also been the drop in equities prices globally, but for European funds in particular. According to Lipper, a Thomson Reuters service, U.S.-domiciled equity funds investing in Europe have had a string of seven straight weeks of net outflows.
The dollar dropped versus the safe-haven to near 102, off 0.5 percent with the Japanese currency underpinned by safe-haven buying. Traders cited a possibly erroneous trade that sent the currency pair sharply lower at midday.
--By Reuters. For more information on currency prices, please click here.