The dollar lost ground against the majors in New York as traders positioned themselves ahead of tomorrows US Trade Balance data.
The markets expect that US Trade deficit ballooned to $56.8 billion in January as consumers most likely spent more on imports. Today's economic releases revealed a higher budget gap of $113.9 billion in February versus the $100 billion deficit expected by the markets.
The big story that rattled the markets was the comments made by the Japanese officials about possible diversification of the currency reserves away from the dollar. Later comments where reversed, but now Japan with its $820 billion of currency reserves joined the likes of Korea, Russia and Brazil in announcing a possible diversification.
With the US deficits rising, dollar bulls are becoming hard pressed to find any positive data to support their cause as the greenback fell against the majors to levels not seen in years or ever as in case with New Zealand dollar, which continues to establish all-time highs.
The US dollar was quoted at 1.3423-26 against the euro, 1.9223-28 versus the pound and 104.07-11 against the Japanese yen at 01:30 GMT.
US financial markets stage a rebound following yesterdays sharp sell off as oil prices receded from the four-month highs.
The Dow average climbed 45.89, or 0.4 percent, to 10,851.51 while the Standard and Poor's 500 added 2.24, or 0.2 percent, to 1209.25. . The NASDAQ slipped 1.57, or 0.1 percent, to 2059.72.
Financials gained following yesterdays sharp decline in bond prices. Citigroup, the No. 1 financial services company, climbed 27 cents to $48.15. Wachovia Corp., the fourth-biggest U.S. bank, added 36 cents to $52.40. Wells Fargo and Co., the fifth- largest U.S. bank, rose 47 cents to $60.21.
General Motors rallied 53 cents to $34.61 after the company announced an incentive to boost car sales.
Toys ``R'' Us Inc. added 62 cents to $23.67 on news of an acquisition bid from a group of private equity funds.
Standard and Poor's 500 futures for March delivery added 2.50 to 1213.50 on the Chicago Mercantile Exchange while Nasdaq-100 Index futures were unchanged at 1534.