Dollar sinks in New York

The dollar sank on Wednesday as news Iranian warships were en route to Syria rekindled geopolitical tensions in the Middle East, sparking a spike in oil and a surge in traditional safe-haven currencies such as the Swiss franc. Technical factors and market positioning also weighed on the dollar, especially against the euro, as investors holding short euros got squeezed when the greenback fell and crude oil rose.
The dollar's losses, however, should prove short-lived, some analysts said, with the currency supported by a recent spate of positive US economic data. In general, the greenback tends to fall when oil prices, which are denominated in dollars, rise because it becomes cheaper for overseas investors holding foreign currencies to buy crude oil.
In late afternoon trading, the euro rose 0.5 percent against the dollar to $1.3562, its second consecutive daily gain. Investors short the euro tried to push the currency below $1.3480, the roughly 38.2 percent Fibonacci retracement of the euro's January to February rally.
The euro got as low as $1.3462 on electronic trading platform EBS in the wake of Wednesday's positive US data, but it quickly rebounded on short-covering. The Swiss franc, a traditional safe-haven, especially during times of geopolitical turmoil, rose, pushing the dollar down 0.8 percent to 0.9597 francs. It soared nearly 1 percent after the news broke.
The franc has risen against the dollar for three straight sessions and has gained roughly 2.5 percent so far. The Swiss currency also edged up against the euro, which slipped 0.2 percent to 1.3016 francs. On the month, the euro was still up 0.7 percent. Meanwhile, the dollar's nearly two-week rally against the yen came to a halt, with earlier gains erased as US Treasury yields fell on the Middle East news. US inflation and housing data sent Treasury yields higher early in the session.
The dollar has outperformed the yen in nine of the past 11 sessions as US Treasury yields factored in inflation. In late afternoon New York trading, the dollar was down 0.1 percent at 83.67. The dollar showed little reaction after the Fed minutes, although the comments added to the greenback's generally positive tone this month.
Sterling fell sharply as investors revised expectations for a rate rise after the Bank of England downgraded its economic growth forecast in its quarterly inflation report, even as consumer prices spiked higher. Sterling fell to the day's low of $1.5987, compared with around $1.6140 before the Bank of England's quarterly report on inflation was released. It was last at $1.6083, down 0.2 percent.