The dollar traded mixed Wednesday as reports on manufacturing and housing pointed to a significant weakening of the U.S. economy.
Investors have traditionally seen the dollar as a safe haven since the financial crisis began. They drove up its value this summer as European debt problems intensified and after Lehman Brothers collapsed, triggering a financial crisis.
The dollar's appeal as a safe haven has been somewhat tarnished this summer, however, as expectations for U.S. growth weakened. The U.S. currency has slid against other currencies considered safe, such as the Japanese yen and Swiss franc. The price of gold, another safety buy, has also surged this summer.
However, the worst of expectations for the U.S. economy may already be reflected in the dollar's current value, while deteriorating conditions in Europe are not, said Brian Dolan, chief currency strategist at Forex.com. He expects the dollar to rise versus the euro and pound in the second half of the year.
On Wednesday, the euro, which is used by 16 European countries, dipped to $1.2657 from $1.2673. The British pound edged up to $1.5451 from $1.5442.
The dollar rebounded slightly from a 15-year low of 83.61 Japanese yen Tuesday. It rose to 84.73 Japanese yen from 84.26 yen in late trading. The yen also hit its strongest point since 2001 versus the euro Tuesday. Monetary authorities in Japan are under increasing pressure to take steps to ease the yen's gains. A stronger currency hurts profits of exporters.
The dollar fell to its weakest point versus the Swiss franc since January at 1.0250 francs on Wednesday. In the late afternoon, the dollar traded at 1.0292 francs from 1.0314 francs Tuesday.
Against a basket of six major currencies, the dollar rose nearly 2 percent in late trading.
Helping support the dollar Wednesday was news from the government that a key measure of the manufacturing sector stumbled 3.8 percent last month, the biggest drop since January. Companies cut back on orders for big manufactured goods, excluding commercial aircraft orders. Manufacturing has helped lead the country out of recession, and a slower industrial sector will weigh on economic growth.
The government also said sales of new homes plunged 12.4 percent in July to the slowest pace on records that date back to 1963.
"The news on the housing market has gone from bad to dire," said Paul Dales, an economist with Capital Economics in Toronto. He predicted that home prices will drop 5 percent by the end of 2011, which would help keep economic growth in the U.S. at 2 percent or lower for years.
Developments from overseas also helped boosted the U.S. currency. Credit ratings agency Standard & Poor's downgraded Ireland's debt because of the high costs of supporting the country's troubled banks.
That helped bring Europe's debt problems, which had helped drag the euro to a four-year low in June, back into the spotlight, Dolan said.
In other trading Wednesday, the dollar rose to 1.0606 Canadian dollars from 1.0600 Canadian dollars.