NEW YORK (Reuters) - The dollar fell against a basket of currencies on Wednesday as a batch of disappointing U.S. data on consumers, housing and manufacturing raised concern that the world’s biggest economy is losing momentum in the final months of 2014.
Volume was lighter than average ahead of the U.S. Thanksgiving holiday on Thursday, when U.S. financial markets will be closed. Many U.S. traders are expected to stay out of the office on Friday when markets reopen.
The greenback’s decline was limited by expectations that the Federal Reserve might consider lifting short-term U.S. interest rates from near zero in mid-2015 as other major central banks recently loosened monetary policies to help their economies, analysts said.
“Today’s data were underwhelming,” said currency strategist Brian Dangerfield of RBS Securities in Stamford, Connecticut.
“Monetary policy divergence is the key theme for the currency market,” he said. “It is still positive on the dollar on that fundamental story.”
The dollar index, a gauge of the greenback’s value against a basket of the euro, the yen and four other currencies, fell 0.35 percent to 87.615, below the nearly 4-1/2 year peak of 88.440 reached on Monday.
The dollar was 0.2 percent lower on the day at 117.70 yen, halving its earlier decline. It remained below the seven-year high of 118.98 seen last week.
The euro gained 0.3 percent against the dollar at $1.2513, extending its rebound from nearly a two-year low of $1.2358 earlier this month.
The single currency overcame an earlier drop against the dollar after European Central Bank Vice President Vitor Constancio said the bank could gauge in the first quarter of 2015 whether it needed to buy government bonds.
The Australian dollar hit a four-year low against its U.S. counterpart at $0.8481 earlier Wednesday before recovering on the disappointing U.S. data. It was last up 0.3 percent at $0.8548 in U.S. trading.
The Aussie has been one of the biggest decliners during the dollar’s rally since July. Reserve Bank of Australia Deputy Governor Philip Lowe propelled it to its lowest since August 2010 on Tuesday by saying it was still overvalued.
Additional reporting by Patrick Graham in London; Editing by Jonathan Oatis and Lisa Von Ahn