Dollar falls in London

The dollar retreated from an earlier one-week high against the euro on Wednesday ahead of data that is expected to show the US current account deficit widened to a record level in the fourth quarter. The dollar failed to hold onto gains after it spiked up in New York trade on Tuesday after data showed the United States attracted enough overseas investment to finance its trade deficit in January. Concerns about the US current account gap have contributed to the dollar's three-year decline.
"The market is focusing back on the current account data coming out this afternoon. Data yesterday was quite strong but the concern about the structural problems is deep-rooted," said Niels Christensen, senior currency strategist at Societe Generale in Paris.
The data, due at 1330 GMT, is expected to show a widening in the deficit to $181.90 billion in October-December from a record $164.71 billion in the previous quarter.
By 1240 GMT the euro was up a half percent on the day at $1.3382 after hitting a one-week low of $1.3292 in Asia.
The single currency got a boost after a media report said sources suggested the European Central Bank could well hike interest rates by September, earlier than previously thought. The ECB declined comment.
The yen was mixed, up a third of a percent against the dollar at 104.12 yen but slightly down on the euro at 139.35.
The Bank of Japan upgraded its assessment of the economy slightly but kept policy unchanged. The government kept its view for March, saying the economy is recovering moderately.
On Tuesday the dollar got a boost from data showing a net capital flow of $91.5 billion into US assets in January, exceeding the $58.3 billion trade deficit for January.
Private investors turned aggressive buyers of US assets in January, while net foreign official purchases rose only slightly.
In recent weeks concerns central banks might diversify away from the dollar have weighed on the greenback but Britain's Halifax Bank of Scotland says, thus far, reserve diversification appears to be about asset classes rather than currency composition.