Dollar mixed against rivals
Euro holds ground despite recession in Germany while the yen and pound fall against the U.S. currency.
NEW YORK (CNNMoney.com) -- The U.S. dollar was mixed against its major trading partners Thursday as investors responded to bleak economic news and falling stock prices.
The euro was trading up against the dollar at $1.2495 from $1.2479 late Wednesday in New York. The 15-nation currency briefly fell below $1.24 overnight after German finance officials said Europe's largest economy tumbled into recession.
The British pound was down another 3 pence at $1.4607 from $1.4938. The dollar rose to a 6-year high against the pound Wednesday as investors bet the Bank of England will continue to aggressively cut interest rates.
Against the Japanese yen, the dollar rose to ¥95.46 from ¥94.94. The yen fell 1.3% against the euro to trade at ¥119.95.
The yen's decline came after the Reserve Bank of Australia confirmed that it is buying Australian dollars to help prop up the Aussie currency. The RBA's move bolstered the market's appetite for risk as investors speculated that other central banks will intervene.
But grim news about the German economy damped enthusiasm for higher yielding currencies like the euro.
Germany's gross domestic product contracted by 0.5% in the July-September period compared with the previous quarter, according to the country's statistical office. It was a much sharper fall than the roughly 0.2% decline economists had expected.
In the previous quarter, Germany's GDP fell 0.4%, which was the first decline since late 2004, after a 1.4% growth rate in the first quarter.
Despite the dour economic news, the Germany's DAX stock index rose 0.6% as investors appeared to have priced in the weak GDP numbers.
"It's not a surprise that the Germany economy is in a recession," said Ashraf Liadi, chief currency analyst at CMC Markets in New York.
But the euro has managed to remain relatively buoyant despite the heavy burden of a German recession.
"The market is showing a brief interruption in the selling that we've seen in five out of the last six sessions," Liadi said. Currency traders are "doing some buying so they can do some selling later on."
Other European markets were mixed. France's CAC 40 rose more than 1% while the FTSE in London was down 0.3%.
In the United States, stocks were down for the fourth day in a row, falling below key support levels as fears of a prolonged recession weighed on the market.
The selloff comes despite a government report that showed the nation's trade balance narrowed in September.
While the report would normally have been considered a positive, the improvement was largely due to a decline in oil imports and weaker exports due to global economic weakness.
"Equities appear to be pulling the currency market around by the ear," said Steve Malyon, currency strategist at Scotia Capital in Toronto. "So the focus will likely remain on whether the stability in Europe can hold, or a fresh round of selling gives a renewed lift to the U.S. dollar and yen." 
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