LONDON — The European single currency edged upwards against the dollar in subdued trade on Wednesday after encouraging US data that soothed some fears over the pace of global recovery, dealers said.
In late morning London deals, the euro firmed to 1.2890 dollars from 1.2881 dollars in New York late Tuesday.
Against the Japanese currency, the dollar eased to 85.31 yen from 85.47 yen on Tuesday.
The dollar could fall further on continuing uncertainty over the global economy, according to analysts.
"There still is a strong sense that the dollar will weaken in the future," said Yuzo Sakai, manager of foreign exchange business promotion at brokerage Tokyo Forex & Ueda Harlow.
Dealers continued to digest a string of cautiously positive data and earning reports, which injected some market enthusiasm on Tuesday after last week's turbulent trade on US economic recovery concerns.
The US Federal Reserve reported a higher than expected 1.0-percent rise in industrial production in July on the back of auto manufacturing.
Meanwhile, the euro was boosted on Tuesday by successful bond auctions in both Ireland and Spain -- but was unable to stay above the 1.29-dollar barrier.
"The successful issue of bonds in Spain and Ireland were arguments in favour of the euro yesterday," Commerzbank analysts said on Wednesday.
"The fact that the euro was nonetheless unable to defend levels around 1.29 due to weakening stock markets overnight supports our theory though -- the structural issues remain," they added, referring to the eurozone debt crisis.
Elsewhere, many players were taking a wait-and-see approach as the Japanese government mulls plans to deal with the rising yen and reinvigorate its economy.
Japan has not intervened in currency markets since 2004 but government leaders have recently voiced concerns over the strength of the yen in a "verbal intervention" aimed at taming the currency's recent rise.
Prime Minister Naoto Kan is expected to offer a broad outline of additional stimulus measures as early as September in a bid to safeguard a recovery threatened by a strong yen.
He is set to meet Bank of Japan governor Masaaki Shirakawa next week.
In trading in London, the euro changed hands at 1.2890 dollars against 1.2881 dollars on Tuesday, at 109.96 yen (110.10), 0.8236 pounds (0.8265) and 1.3420 Swiss francs (1.3438).
The dollar stood at 85.31 yen (85.47) and 1.0413 Swiss francs (1.0423).
The pound was at 1.5654 dollars (1.5586).
On the London Bullion Market, the price of gold edged up 1,226.25 dollars an ounce from 1,226 dollars an ounce on Tuesday.
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