Statistics indicates contraction for European economy

The U.S. dollar strengthened against the euro on Wednesday after strings of statistics indicated contraction for the European economy.

Germany’s business sentiment compiled by Ifo Institute fell in October for the sixth consecutive month to the lowest level since February 2010. Moreover, the Purchasing Managers Index of the euro zone declined more than expected.

The euro pared some losses later in the day after a report said officials of the European Union, European Central Bank and International Monetary Fund had given Greece more time to implement its austerity plans.

The euro has been staying above the level of 1.2900 in recent weeks, supported by speculations that Spain would ask for a bailout, but the region’s gloomy outlook has limited the room for the currency to gain.

The Federal Reserve ended a two-day policy meeting Wednesday and maintained its easing policy as expected, but investors expected the Fed to decide whether it would keep the current bond- buying program at the next meeting on Dec. 12.

Meanwhile, U.S. Commerce Department data showed sales of new homes in the U.S. rose 5.7 percent to 389,000, the best figure since April 2010.

In late New York trading, the euro dropped to 1.2973 dollars from 1.2976 of the previous session, and the British pound climbed to 1.6036 dollars from 1.5942.

The dollar slipped to 0.9325 Swiss francs from 0.9332 and went up to 0.9940 Canadian dollars from 0.9927.

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