Dollar Ends '09 Win Streak

The dollar retreated against the euro, the yen and the pound as concern flared about the U.S. economy, but the greenback clawed back losses as stock markets crumbled.

Wednesday marked the dollar's first losing session in 2009, snapping a five-day winning streak against the yen and three days of gains versus the euro.

The greenback had fallen against most rivals in overnight trading, stung by the bleak outlook on the U.S. economy shown Tuesday in the minutes of the December meeting of the policy-setting Federal Open Market Committee.

Foreign Exchange Data

The dollar's slide accelerated after a report by payroll company Automatic Data Processing Inc. and consultancy Macroeconomic Advisers indicated private-sector job losses of 693,000 in December, a far larger decline than expected by analysts.

A slump in U.S. equities coincided with the dollar's partial recovery, said analysts.

Late afternoon in New York, the euro was at $1.3630, up from $1.3522 late Tuesday. The dollar was at 92.66 yen, down from 93.85 yen, while the euro traded at 126.30 yen, off from 126.91 yen. The pound traded at $1.5110, up from $1.4956, and the dollar was at 1.1016 Swiss francs, below 1.1143 francs late Tuesday.

"Although [the dollar] already was in retreat thanks to the FOMC minutes and President-elect Obama's musing on the potential for 'trillion dollar deficits for years,' the ADP employment report was another stone-cold dose of sober reality about the U.S. economy that helped cut the legs out from under U.S. stocks at the open and stemmed the recent movement toward higher-risk securities," said a report from David Watt, senior currency strategist at RBC Capital Markets in Toronto.

Economists surveyed by Dow Jones Newswires believe the Labor Department's nonfarm payrolls data will show a loss of about 525,000 jobs in December. Wariness ahead of that report could weigh on the dollar Thursday.

"I think there is a case for a somewhat weaker dollar in the run-up to the nonfarm payrolls report," said Vassili Serebriakov, currency strategist at Wells Fargo Bank in New York.

And while the euro managed to retain a significant portion of it gains, the common currency could prove vulnerable, analysts said.

The euro could be stymied by expectations for continued rate cuts from the European Central Bank, as well as continued deterioration in economic data, said Tyson Wright, at Custom House, a currency-services firm in Victoria, British Columbia, Canada.

—Robert Flint contributed to this article.

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