US recovery concerns weigh on dollar

The dollar lost ground in Asian trade Thursday after a warning from the US Federal Reserve that the world’s top economy was slowing in some areas, adding to the view that recovery was stalling.

With investor confidence taking a hit, the dollar slipped to 87.33 yen from 87.78 yen in New York Wednesday afternoon amid heightened safe-haven demand. The euro stood at 1.2985 dollars, slightly down from 1.2997 dollars in New York. The single currency fetched 113.39 yen compared with 113.63.

Softer stock markets in Europe and the US Wednesday reflected moderation in investor risk-appetite, said John Kyriakopoulos of National Australia Bank, as the run of weaker-than-expected US economic reports continued.

Durable goods orders fell for a second consecutive month in June, while the US Fed published its latest Beige Book report Wednesday, warning the “modest” US economic recovery was slowing in some parts of the country.

“Risk aversion dominated across most asset classes,” as a result, noted Credit Agricole in a report. A smaller-than-expected rise in Australia’s inflation rate in the second quarter of 2010 continued to hurt the Australian dollar, which was flat at 0.8928 US dollars after falling from 0.9003 Wednesday.