Euro extended losses against the dollar in the North American session to fall to a new six-week low as investor risk appetite was diminished after a disappointing German bond auction earlier today. Weak demand for the so- called safe assets only show that confidence in the core of the euro zone is also waning. EURUSD fell 1.5 percent on the day to bottom at 1.3325. The sell-off in the single currency began early in the Asian session after a report on manufacturing in China signalled a slowdown in the country. Following from this, euro zone economic data also showed sluggish growth in the region, fuelling fears of a global recession.
Meanwhile risk sentiment was further dampened after economic data showed consumer spending in the U.S. rose less than expected in October and durable goods orders also declined, indicating manufacturing is slowing down.
The US dollar Index rose to its strongest level in almost seven weeks due to risk aversion pushing investors to the safe haven and liquid greenback as they unwind riskier assets. The dollar index which tracks the dollar against a trade-weighted basket of six other currencies, rose to 79.151 from 78.252 late Tuesday.
Dollar rose against the yen and Swiss franc. USDJPY climbed to 77.57 from 76.91 and USDCHF rose to 0.9212 from 0.9127.
The Canadian dollar weakened to a seven-week low against the US dollar as the commodity-linked currency was weighed by falling crude oil prices. Canada is a major oil exporter. USDCAD climbed 0.9 percent on the day to peak at 1.0466 in the US session.
The Australian dollar is another commodity-price sensitive currency to fall against the greenback today. The aussie fell by a larger margin against the USD, tumbling by 2 percent on the day. AUDUSD bottomed at 0.9662, the lowest since October 6.
Sterling fell for a third day after minutes of the Bank of England monetary policy committee rate-setting meeting this month showed increased support for additional quantitative easing in the future given current economic conditions. This would weaken the pound as a result of printing more money.